You might know the term “prenup” (which is an abbreviation of prenuptial agreement) but the legal term is called a Binding Financial Agreement (BFA), and they’re a legitimate legal tools enshrined under the Family Law Act 1975 (the Act).
This article breaks down what a BFA is, why it's beneficial, its legal enforceability and costs, along with an essential look at de facto relationships and how they fit into the conversation.
Taking the next step in a relationship often involves discussions about more than just moving in together. It’s about considering your future in legal and financial terms too. Part of that consideration should be understanding and potentially establishing a BFA.
What is a Binding Financial Agreement?
A BFA is a “contract” that couples can enter into at various stages of their relationship (before, during or after marriage, as well as a de facto relationship). BFAs ousts the jurisdiction of the Federal Circuit and Family Court of Australia (the Court) and enables spouses to decide themselves how their assets, liabilities, superannuation and financial resources will be split if the relationship comes to an end.
De Facto Relationships and Binding Financial Agreements
Not limited to those married, a BFA is a significant document for those in de facto relationships too. But what constitutes a de facto relationship? Legally, you may be considered de facto if you live together on a genuine domestic basis. Factors contributing to this status include the duration of the relationship, shared finances, property ownership , and whether there’s a child.
Even if a couple are not married or only at the outset of living together, it's worth considering a BFA. Why? Because should the relationship end, one party may be entitled to make a claim for a property settlement or spousal maintenance akin to those rights for married spouses. This is where a BFA can pre-emptively manage the division of assets and protect both parties against unforeseen claims even if they don’t get married.
Why You Need a Binding Financial Agreements
Whether married or in a de facto relationship, a BFA is about being proactive with your financial well-being. It offers a clear plan for how assets, liabilities, superannuation and financial resources should be treated if the relationship were to break down . This avoids potential disputes or the intervention of the Court, which may not result in an outcome you agree with. It's a tool for maintaining autonomy over your finances irrespective of how your relationship may evolve.
Are Binding Financial Agreements Enforceable by a Court?
BFAs are enshrined in law under Part VIIIA (for marriages) and Part VIIIAB (for de facto relationships) of the Act. If one spouse does not comply with the terms of a BFA following separation the other spouse can seek that the BFA be enforced as if it was an order of the Court.
On the contrary, the Court also has the power to set aside a BFA if it does not comply with the strict requirements of the Act, which include each spouse receiving independent legal advice on their rights and the advantages and disadvantages of entering into the BFA.
A BFA may also be set aside if it was obtained by fraud (including non-disclosure of a material matter), was entered into under duress and/or undue influence or a party engaged in unconscionable conduct.
If a BFA is set aside by the Court, it will be as if it never existed and a property settlement will be determined by applying the ordinary principles of family law. Accordingly, legal assistance from a specialised family lawyer is vital to ensure that a BFA is enforceable.
How Much Does a Binding Financial Agreement Cost?
The cost of drafting a BFA varies, but you can anticipate spending between a couple of thousand to over ten thousand dollars, based on your circumstances and the complexity involved in reaching an agreement. It's a sound investment in protecting your assets and is considerably more affordable than potential legal proceedings in the event of a relationship breakdown.
Speak to a Family Law Expert About Drafting a Binding Financial Agreement
Understanding the significance of a BFA, especially in the context of de facto relationships, is critical. Even in the early stages of cohabitation, a BFA can provide clarity and security. At BlueRock, our estate planning lawyers partner with trusted family lawyers who can tailor these agreements to fit your unique situation, giving you one less thing to worry about as you focus on building your life together. Speak with one of our Melbourne-based estate planners to discuss your family situation.
