Prenuptial And Other Binding Financial Agreements
Prenuptial And Other Binding Financial Agreements
Marriage Or De Facto
There are three types of Binding Financial Agreements:
- Before Marriage or Defacto Relationship – what our friends the Americans call a “Prenuptial Agreement” and is entered into before the couple marry.
- During Marriage or Defacto Relationship.
- After Marriage or Defacto Relationship – after divorce or breakdown of the relationship.
A Binding Financial Agreement (BFA) is a formal contract that a couple can enter into. This agreement sets out how their assets (including superannuation), debts and financial resources will be divided in the event of separation, divorce or the breakdown of the relationship.
A Binding Financial Agreement is also the same Agreement that people who have been through a divorce or de facto property settlement put in place to formalise and finalise how their asset pool is to be divided.
The benefit of a Binding Financial Agreement being drawn up prior to a relationship breakdown is that having a formalised agreement of ‘who gets what’ in place already, saves people from the need to negotiate about the terms when the relationship comes to an end and more importantly saves them from going to court.
It is a far better approach to have this plan in place early. A Binding Financial Agreement helps many couples end their financial relationship without the additional stress and costs that so often comes with the property settlement process that unfolds once a relationship ends.
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WHAT IS COVERED IN A BINDING FINANCIAL AGREEMENT?
A Binding Financial Agreement details:
- The assets, liabilities, property and superannuation that you and your partner or spouse have.
- How your assets, liabilities, property and superannuation will be divided.
- Spousal Maintenance, that is what financial support you may pay or receive from your spouse/partner if the relationship breaks down.
- There are specific financial arrangements relating to Child Support for any children you have together; and
- Other details of note that you and your partner or spouse wish to have detailed, upon advice from your family lawyer.
WHEN TO CONSIDER A BINDING FINANCIAL AGREEMENT
Having a family lawyer draft a Binding Financial Agreement can be beneficial for people who:
- Have income and/or assets that are significantly more than their spouse or partner.
- Want to avoid the conflict, costs and Court battles that can arise.
- Wish to protect an inheritance they may be eligible to receive in the future.
- Desire financial certainty about where they and their spouse/partner will stand if the marriage or de facto relationship breaks down.
Another benefit of having a Binding Financial Agreement in place is that if you do separate in the future, you can avoid having to pay the stamp duty associated with the transfer of a property and you will enjoy the benefit of Capital Gains Tax rollover relief.
Importantly, a Binding Financial Agreement can be updated and added to over time. This is important if you have children together and as your financial circumstances evolve.
Want to ensure you’re making good, long-term decisions?
Wish to minimise the need to manage a financial separation down the line when stress and conflict is often high?
Are Binding Financial Agreements Enforceable?
A Binding Financial Agreement is a legally binding contract and is enforceable by the Federal Circuit and Family Court of Australia. That is, the parties must abide by its terms or the court will force them to. That being said, you must seek a highly experienced family lawyer to assist you with the drafting of this type of Agreement to minimise the risk of it being challenged or unenforceable.
A Binding Financial Agreement can be overturned & set aside if for example:
- The Agreement was obtained fraudulently. This includes a failure by one of the parties to exchange full and frank financial disclosure with the other. As an example, Stephen and Sarah enter into a Binding Financial Agreement. Stephen does not disclose to Sarah a secret property that he has. Sarah subsequently finds out about Stephen’s property and asks the Federal Circuit and Family Court of Australia to set the Binding Financial Agreement aside as Stephen did not provide her with complete financial disclosure.
- A person has entered into the Binding Financial Agreement to try to defraud or defeat a creditor.
- It does not meet the legal requirements. For instance, if either party did not obtain independent legal advice prior to signing the Binding Financial Agreement.
- A party engaged in unconscionable conduct to get the other party to sign the Binding Financial Agreement. This could be through immense pressure, violent threats or coercion. For instance, Anthony and Tina’s wedding is next week. Anthony threatens not to go through with the wedding if Tina does not sign the Binding Financial Agreement. That will be enough for Tina to apply to court for the agreement to be set aside.
- One person lacked capacity to understand what they were agreeing to (e.g. intellectual disability, under 18 or intoxicated).
- Material Change in circumstances relating to the care, welfare and development of a child that causes hardship if the agreement was to be enforced.
How Common Are Binding Financial Agreements?
It has become more common for couples to execute Binding Financial Agreements before they walk down the aisle or commit to an exclusive de facto relationship. Anyone who has been through the divorce or property settlement process is aware of the toll these processes have on their well being and peace of mind. Having an agreement usually avoids those difficulties.
How Long Do Binding Financial Agreements Last?
A financial agreement lasts forever – even after one of the parties passes away.
If it is a financial agreement before marriage (prenuptial) It is advisable that you and your partner have a clause in the agreement where you are able to have it reviewed every few years as it may need to be updated to reflect changes in your personal and financial circumstances.
Otherwise the financial agreement may amount to a trap.
What If My Partner Doesn’t Want To Sign The Agreement?
As explained above, you cannot force or coerce your spouse or partner to sign a Binding Financial Agreement.
Encourage your partner to seek independent legal advice about the agreement so they can make an informed decision. These Agreements are not only for the person who came into the relationship wealthier than the other. A Binding Financial Agreement provides certainty and clarity for both parties in the event of a breakdown in their relationship. In many ways it simplifies the financial separation while you deal with the non-financial aspects of the separation.
Before Signing A Prenuptial Agreement
Before signing a Financial Agreement, you must by law obtain independent legal advice. if no such advice is obtained, you do not have an enforceable Binding Financial Agreement.
We assist people in both the drafting of an initial Binding Financial Agreement, reviewing and making recommendations for amendments to what has been proposed. We focus on the best interests of our client with a view to get to a mutually suitable agreement that will be enforceable.
We also provide the certificate of independent legal advice as required by the Family Law Act.
Online Binding Financial Agreements
Downloading and completing a template Prenuptial Agreement or Binding Financial Agreement from the internet may cost you significantly less than what it would cost to engage a lawyer to draft the document for you. However, these types of documents are not specific to your circumstances and if elements are overlooked in the Agreement, that may well make it unenforceable.
Even if you download such an agreement, you must obtain Independent Legal Advice from an Australian Legal Practitioner before the agreement will be given the status of “ binding”. That legal practitioner will necessarily need to make changes to the online agreement which you proposed so as to make it safe and appropriate for your circumstances.
We understand that it can be difficult to make a decision about selecting the right people to help you which is why we would like to make it a bit easier for you.
If you decide to work with us after your initial appointment, we will credit the cost of the appointment towards your fees, essentially making your initial consultation free. This is our way of demonstrating our commitment to providing excellent service. We also offer fixed fees for some services as well as convenient payment options. Ask us for more information about these options in your first meeting. We look forward to assisting you.
Prenuptial Agreements And Binding Financial Agreements Sydney, NSW
Having an experienced family lawyer draw up a Binding Financial Agreement or Prenuptial Agreement is a beneficial way to create clarity and certainty about how to approach your finances going forward.
To ensure that your Binding Financial Agreement is enforceable in the Federal Circuit and Family Court of Australia, each of you must seek legal advice and obtain a certificate from the legal practitioner who provided that advice.
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