Different Types of Binding Financial Agreements

The Family Law Act allows married and de facto couples to enter into private agreements known as Binding Financial Agreements (BFA’s) that do not need the review of the Court. BFA’s can deal with how couples intend to divide their property and superannuation in the event of separation or after separation has occurred.

There are different types of Binding Financial Agreements (BFA’s): –

  • Financial Agreements before the relationship commences commonly known as ‘pre-nups’;
  • Financial Agreements during relationships;
  • Financial Agreements after the relationship has broken down effecting a property settlement; and
  • Financial Agreements dealing with Spousal Support during or after the relationship.

If you are considering entering into a BFA before marriage, make sure you obtain legal advice well before your wedding. It is important to leave sufficient time between formalising your agreement and the date of the wedding. A recent High Court decision has highlighted the risks of a BFA being signed too close to the wedding date, as it leaves “ink on the wedding dress” – see Thorne v Kennedy [2017] HCA 49.

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Requirements to be Binding

In order for your BFA to be enforceable, the following requirements must be met:

  • Both you and your spouse / partner must have obtained independent legal advice prior to signing the agreement; and
  • Both you and your spouse / partner must possess a certificate from your legal practitioner confirming that they have advised you independently as to the effect of the agreement on your rights and entitlements under the agreement, and the advantages and disadvantages of you entering into the agreement.

The Family Law Act 1975 (Cth) has a number of other requirements that must be met before BFA becomes binding, such as:

  • The agreement is in writing and signed by both parties;
  • The parties are contemplating entering a marriage or de facto relationship, are in a de facto relationship or marriage, have separated or divorced;
  • It includes a statement from each party to the agreement, before the agreement was signed that the party obtained independent legal advice on their rights and the advantages and disadvantages at the time that the advice was provided to the party of making the agreement;
  • Either before or after signing the agreement, each party was provided with a signed statement by a legal practitioner certifying that the advice with respect to the parties rights and advantages and disadvantages in entering the financial agreement was given;
  • A copy of the legal practitioner’s statement is given to the other party or a legal practitioner of the other party;
  • The agreement has not been terminated and has not been set aside by a court; and
  • Includes a separation declaration unless the agreement is signed post-divorce.

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It is important to lean on those closest to you to help deal with your feelings about your separation. It is also important to seek professional assistance through this process. Some key services include:

  • Family Relationship Centers
  • Reconciliation counselling
  • Separation counselling or mediation
  • Legal Advice from a Family Lawyer

At The Family Lawyer, we appreciate separation is a deeply difficult and confronting time. We take the time to listen and understand your circumstances, and provide you with advice regarding your family law issues.

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Frequently Asked Questions

Yes, however it is important to remember that once a BFA is entered into correctly, it will be considered binding and the setting aside of the BFA (without the other party’s consent) is a difficult and usually expensive process. The circumstances in which a BFA can be set aside include:

  • Dishonesty, such as fraud
  • The logistics of the agreement are impractical to implement,
  • There has been a major change concerning the care and welfare of children, or
  • One party to the agreement acted in an unconscionable (unethical) way.

Once entered into, BFA’s can only be changed by entering a subsequent BFA which entirely replaces the earlier agreement or by making a written agreement (known as a Termination Agreement), which terminates the earlier agreement.

A BFA made between de facto partners will cease to be binding if, it is not made in contemplation of marriage and after entering the BFA the parties marry.

You should not enter into an Agreement hoping that later on you may be able to have it set aside or terminated. You should not rush into entering a Financial Agreement and you should carefully prepare your Agreement with your solicitor.

Deciding on the terms to be included in your BFA is largely up to you and the other party. Terms that need to be included to ensure the BFA is binding include a complete schedule of all the assets, liabilities and superannuation of the parties.

A BFA offers certainty for the finalisation of property matters in the event of a relationship breakdown and will avoid the considerable time, costs and risk in litigating the matter in Court.

The Agreement will, as far as the law permits, protect you from future financial claims by your spouse against property that you will retain according to the terms of the Agreement, or other property which you will acquire in the future.

The BFA can only be set aside in very limited circumstances pursuant to the provisions of the Act. Therefore, you are contracting out of your right to have the Court determine your entitlement to property settlement.

There is no scrutiny of the Agreement by the Court (i.e. to ensure it is just and equitable).

There is no process for registering the BFA with the Court. If you need to enforce the BFA you must first apply to the Court for a declaration that the BFA is valid and enforceable.

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