You may have heard about a binding financial agreement, sometimes referred to as a prenup (prenuptial agreement) but what is it exactly and what purpose does it serve?
A binding financial agreement, or BFA, is an agreement entered into by two people who are in, or are planning to enter into, a close domestic relationship under the Family Law Act. The BFA is intended to formalise the financial position of each party and how each of the assets will be divided in the event that the relationship comes to an end.
A BFA is a practical and cost effective way to safeguard your assets in the event of separation. By having a BFA in place you can potentially avoid the time consuming, emotionally draining and expensive exercise of dividing your assets through the Federal Circuit and Family Court of Australia.
While couples can enter into a BFA at any time during their relationship, including after they have separated and after a Divorce Order has been made, you are encouraged to update your BFA any time there is a significant change in circumstances. A BFA does not neccessarily cease to be valid after the death of one of the parties, it can continue to operate through the estate of the deceased.
If you’ve had a change in circumstances, for example, if you get married, have a child or receive a large sum of monies such as an inheritance, you should create a new BFA to represent your new circumstances.
The financial agreement can include details about the distribution of assets, debts, spousal maintenance and other finance matters. Assets can be things like the home you live in, superannuation or a business, if you’re an owner or partner.
Can I cancel a BFA?
It is possible to cancel a BFA if both parties come to an Agreement that should be the case.
You can terminate the agreement by entering into a Termination Agreement. If you wish to have an updated Agreement, a Termination Agreement is still required, in addition to the preparation of a new BFA.
Simply saying we no longer agree with the BFA does not mean that the Agreement is no longer enforceable under the Family Law Act.
You are unable to update a BFA. If you wish to make any changes you will need to terminate the existing agreement and enter into a new one.
If you are contemplating varying or terminating your BFA, contact our specialist family lawyers for assistance.
If one party to the BFA no longer agrees with the terms, they will have to reach a new agreement with their partner or former partner or apply to the Court to have the BFA set aside.
Can I rely on my BFA if I have to go to court?
A BFA can be set aside by the court for a number of reasons, so it’s important to get an experienced family lawyer to draft the agreement for you.
Some of the reasons a BFA is rendered invalid by the court are:
- The agreement is poorly drafted or executed incorrectly. Each party must receive independent legal advice from a solicitor before entering into a BFA.
- There have been significant changes in circumstances to either or both parties which would make it impractical or inappropriate for the Agreement to be enforced.
- There have been changes in circumstances relating to a child and enforcing the Agreement would create hardship for the carer.
- Either party failed to disclose assets, liabilities or other relevant financial information prior to entering the Agreement.
- The Agreement was entered into for an invalid reason. Invalid reasons include entering into a BFA to defeat creditors or obtain unlawful financial advantage, for example, by accessing social services benefit payments that you would otherwise not be entitled to.
- If either party was forced to sign the Agreement by fraud or under duress, for example, with the threat of a cancelled wedding if the agreement is not signed prior.
If you have a current Binding Financial Agreement and are concerned about its validity contact our experienced family law solicitors today to discuss your individual agreement.
A Family Law Court is unlikely to set aside a BFA simply because the terms are unfair on one party. The Court relies on the fact that both parties received independent legal advice prior to entering into the agreement to address any suggestions that either party did not understand the consequences of what they were signing.
A Binding Financial Agreement is a complex legal document that can have significant impact on your future if you face a relationship breakdown. Our family law solicitors are experienced with BFA’s and will be able to guide you through the process. Contact us today to get the best advice to protect your future.
