Binding Financial Agreements

Binding financial agreements are a growing area of the law, as more people wish to protect their property and other assets in the event that a relationship breaks down.  We provide sensible, thoughtful advice and create these agreements for our clients. Binding financial agreements (or BFAs) are also referred to as:

  • Financial agreements
  • Pre-nuptial agreements (pre-nups)
  • Post-nuptial agreements (post-nups)
  • Cohabitation agreements

As the names suggest, financial agreements may be made before, during or after a relationship ends. They allow couples to agree in advance on an acceptable division of assets if their relationship ends, or to opt out of the usual Court processes of dividing property if an existing marriage or domestic partnership subsequently breaks down. In the right circumstances, a financial agreement can reduce the financial stress of a separation and allow a couple to separate without the need for costly, time-consuming Court action.

What is covered in a financial agreement?

A financial agreement sets out how the parties’ financial resources, liabilities and assets will be dealt with if or when they separate. They are also created by the parties after separation. They are also used by parties AFTER separation. They can also contain provisions regarding financial support (maintenance) by one partner for the other.

The agreement operates like a legal contract between the parties – each person has certain rights and must perform his/her obligations under the contract. This may involve the closing of bank accounts, the payment of money by one party to another within a particular time, the sale of a home and distribution of funds according to the agreement, etc. The parties must act reasonably and in good faith to fulfil the terms of the contract.

Benefits of a financial agreement

Typically, financial agreements provide a quicker and much less expensive way than litigation in Court to divide property after a relationship breaks down. Additionally, financial agreements can also:

  • protect assets accumulated by a party before a relationship
  • protect likely inheritances
  • acknowledge where there was a much greater financial contribution by one party
  • ensure that children of previous relationships inherit
  • preserve family farms or other businesses for future generations
  • provide certainty between parties at the beginning of a new relationship

How is a financial agreement made?

To be valid, a financial agreement must comply with the requirements prescribed under the Family Law Act 1975. The agreement must be in a specific format, contain certain acknowledgements, and each party will need to obtain independent legal advice. Both parties must sign an agreement and their respective legal representatives must sign a statement certifying that they have provided independent legal advice to their client.

Once the parties informally agree between each other on the way their assets should be divided, they should each retain a lawyer to have the agreement drafted, negotiated, reviewed, and settled.

Is a financial agreement legally enforceable?

The strength of a financial agreement is typically not tested unless a circumstance arises in which a person failed to perform his or her obligations under the agreement and the other party applies to the Court for a determination that it is valid and enforceable. If the Court finds that the agreement is effective, then an order may be made for its enforcement.

An application for enforcement of a financial agreement may be opposed by an application to have the agreement set aside. An agreement may be set aside in circumstances such as:

  • the agreement was obtained by fraud or duress
  • a party failed to disclose significant assets when making the agreement
  • the agreement was made to defeat the interests of the other party or a person with whom one of the parties had pending property matters
  • there is a dramatic change in circumstances creating hardship for a party to the agreement or concerning the welfare of a child of the relationship
  • generally, the Court considers it is ‘just and equitable’ in order to preserve the rights of a party

If set up correctly and in the right circumstances, financial agreements can be an effective way for couples to pre-determine ownership of assets and/or liabilities before or during their marriage or de facto relationship. They can also be a cost-effective and efficient approach to agreeing on the division of property and resources after a relationship ends.

If you need assistance, contact one of our lawyers at [email protected] or call 02 4297 6066 for expert legal advice.