Financial Agreements, Binding Financial Agreements or BFAs
You have probably heard of a pre-nuptial agreement or “pre-nup” which is a contract you can enter into before marriage to protect your assets and direct how your property is to be divided if your marriage comes to an end.
In Australia, these contracts are called “Financial Agreements”. They are also incorrectly referred to as a “Binding Financial Agreement” or “BFA”.
When can you enter into a Financial Agreement?
- Before you enter into a de-facto relationship or before you get married;
- during your de-facto relationship or marriage; or
- after separation or divorce, in which case your agreement operates to record the terms of your settlement as an alternative to obtaining consent orders from the Family Court.
Financial Agreements are not just for “celebrities”.
When is it appropriate to use a Financial Agreement?
- To protect your family wealth and or inheritance, particularly where a spouse is a member of a family trust or business;
- Farming families in particular may look to a Financial Agreement to protect the farming enterprise for the next generation;
- To decrease the risk of becoming involved in Family Court proceedings following a separation;
- Couples entering into second or subsequent relationships or marriages often enter into Financial Agreements to protect the assets they bring with them, especially if they wish to preserve such property for any children of their earlier relationship or marriage; and
- As part of general estate planning or business succession planning measures.
What is the effect of a Financial Agreement?
It allows you to contract out of the provisions of the legislation that normally apply to separating couples in relation to spousal maintenance and property settlement. The legislation sets out detailed requirements for the drafting of these agreements. The Family Court has interpreted these requirements very strictly on the basis that if you wish to avoid the protection of the court, you must do so very carefully.
Why is it important to see a lawyer when considering a Financial Agreement?
It is essential that you see a lawyer to ensure that your agreement is, as far as possible, valid and enforceable. At Paterson & Dowding we recommend you speak with either Caroline Teo or Patricia Schrape who are both experienced in drafting, advising and representing clients in relation to these agreements.
Further, it is important that your agreement also works at a practical level, so that in the unfortunate event that you separate, your agreement will operate clearly to manage your financial affairs. In other words, even though your agreement might comply with the legislation, if it has vague or imprecise terms, you might still find yourself unable to use your agreement. This may lead to arguments and the need to ask the Family Court to interpret your agreement.
Is a Financial Agreement always binding?
A Financial Agreement is not always “binding”. It is only binding if all the legislative requirements have been met, the agreement has not been terminated and it has not been set aside by the Family Court. If you think your agreement is not valid, you should seek legal advice to see whether it can be set aside.
Why contact Paterson & Dowding?
We have knowledgeable and experienced lawyers who can assist you to draft a Financial Agreement, or review an agreement prepared by the other party’s lawyer. We can also advise you how to enforce or set aside the agreement. Contact us to book an initial appointment with Patricia Schrape or Caroline Teo for only $360 + GST to discuss how a Financial Agreement might work for you.