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What is a Binding Financial Agreement, and do I need one?

A BFA is a private agreement that allows couples to manage their financial arrangements without involving the court. It can be created at different stages of a relationship:

What Is a Binding Financial Agreement?

A Binding Financial Agreement (BFA) is a legally enforceable document under the Family Law Act 1975 in Australia that sets out how financial matters will be handled between you and your partner. It can address property division, spousal maintenance, and other financial issues, providing clarity and certainty in the event of a relationship breakdown. Here’s an in-depth look at the BFA:

  1. Before the relationship or marriage: Commonly referred to as a “pre-nuptial agreement,” it protects assets brought into the relationship.
  2. During the relationship: It can outline how assets and finances will be managed while together.
  3. After separation or divorce: A BFA can formalise a financial settlement, preventing disputes or court proceedings.

A BFA can cover:

  • Division of property, assets, and liabilities.
  • Spousal maintenance (if one partner needs financial support).
  • Superannuation splitting arrangements.
  • Other financial issues tailored to the couple’s needs.

Do I need a Binding Financial Agreement?

    You may benefit from a BFA if:

    1. You want to protect your assets: If you enter a relationship with property, assets, or investments, a BFA allows you to agree on property division upfront, minimising potential disputes.
    2. You contribute different financial resources: Establish clear arrangements if one partner contributes more financially or receives an inheritance.
    3. You’re in a De Facto relationship: Define financial arrangements clearly, particularly when property ownership is shared.
    4. You’re in a second or subsequent relationship: To protect assets for children from a previous relationship or safeguard specific property.
    5. You want to avoid Court disputes: A BFA can reduce stress, cost, and time by providing a clear agreement upfront.
    6. You want certainty in case of separation: Knowing in advance how finances will be managed can provide peace of mind.

    Advantages of a Binding Financial Agreement

    • Asset protection: Safeguards pre-relationship assets, inheritances, or family businesses.
    • Clarity and certainty: Outlines financial arrangements, reducing the likelihood of disputes.
    • Avoids court: Resolves financial matters privately without relying on court orders.
    • Flexibility: More personalised than a Court-determined settlement.

    Disadvantages and risks

    • Challenging to enforce: BFAs must meet strict legal requirements, and errors in drafting or execution can lead to invalidation.
    • Can be set aside: Courts can overturn a BFA if:
      • It was signed under duress, fraud, or undue influence.
      • One party failed to disclose all financial information.
      • It is deemed unfair or unreasonable due to significant changes (e.g., having children or financial hardship).
    • Costs: Drafting and finalising a BFA involves legal fees.

    How to create a Binding Financial Agreement

    1. Seek legal advice: Each party must have independent legal representation. A family law solicitor will explain the terms and certify that you understand the agreement’s implications.
    2. Disclose financial information: Both parties must fully disclose their assets, liabilities, and income.
    3. Draft the agreement: Your lawyer will prepare the document, ensuring it complies with legal requirements.
    4. Sign the agreement: Once both parties agree, the BFA is signed in the presence of legal representatives.

    Alternatives to a BFA

    • Consent Orders: A more straightforward option for formalising property or financial agreements after separation, as they are approved and enforced by the court.
    • Informal agreements: While easier to create, these are not legally binding and offer little protection if disputes arise.

    Is a BFA Right for You?

    A Binding Financial Agreement can provide significant benefits, particularly for individuals with complex financial situations or significant assets. However, it’s essential to approach a BFA with careful planning and seek professional legal advice to ensure it is fair, enforceable, and suited to your unique circumstances.

    If you’re considering a BFA, consult our family law team to discuss your situation and determine the best course of action. The first 15 minutes are complimentary. Call Orman Solicitors on 1300 676 267 to determine if a BFA is right for you.