Binding Financial Agreements

What you should know

Wanting to enter into a “pre-nup” with the other party before you decide to live together or marry?

Yes, “pre-nups” as they are called in America, are legal in Australia and known as “binding financial agreements”.

The Family Law Act allows married, de facto and/or same sex couples to enter into legally Binding Financial Agreements with respect to their property.

What are binding financial agreements?

A Binding Financial Agreement (“BFA”) can be entered into at any time, that is:

• Before the relationship or marriage (sometimes referred to as a “pre-nuptial agreement”)
• During the relationship or marriage
• After separation or
• After divorce in the case of married couples.

A BFA sets how, in the event of the breakdown of the relationship, all or any of the property or financial resources of either or both of the parties to the relationship is to be divided.

Indeed, a BFA can deal with all financial and property issues between the parties, including extinguishing claims for spousal maintenance.

While it may be possible for you to reach agreement in writing with your former partner regarding financial issues, such an agreement is not legally binding unless both of you receive legal advice and have your property settlement lawyers certify the agreement.

What makes financial agreements binding?

To be binding and enforceable, the following requirements must be complied with:

• the agreement must be signed by all parties;
• before signing the agreement, each party must be provided with independent legal advice from a legal practitioner. The legal practitioner must provide advice about the effect of the agreement on the rights of that party, and about the advantages and disadvantages of entering into the agreement; and
• each party must be provided with a signed statement by the legal practitioner stating that they gave advice to that party. This statement must also be provided to the other party, or to the legal practitioner for the other party.

Provided a BFA complies with the Family Law Act, subject to certain exceptions, the parties are prevented from making an application to the Court for orders relating to the property dealt with in the BFA.

BFA or Consent Order?

Whereas financial issues decided by the Courts under the Act determine whether the property settlement is fair, just and equitable to both parties, a BFA effectively allows the parties to “contract out” of these provisions and thereby prevents the Court from making an order in relation to the parties’ property.

For this reason, the Court has interpreted the legislative requirements for a BFA very strictly, on the basis that, if parties are going to contract out of rights and entitlements as prescribed by the Family Law Act, they should only do so with fully informed consent and understanding of the consequences. The Court is not able to set aside a BFA just because it is “unfair” to one party. Therefore, receiving independent and proper legal advice as to the effect of the BFA is crucial.

Given the uncertainty surrounding BFAs, the preferred option in finalising property settlement matters post separation is to file Consent Orders in the Family Court. The Family Court will review the proposed Orders and, if satisfied that they are fair, just  and equitable for both parties, the Court will make Final Orders in the terms as agreed. Consent Orders, unlike BFAs, can only be set aside if there has been a miscarriage of justice by reason of duress or fraud (including failure to disclose material information).

However, Consent Orders are an option only available to parties to a relationship that has broken down. For parties currently in a relationship, or about to enter into a relationship, a BFA is the only option should they wish to determine how property is to be divided following separation.

Why you need one of our binding financial agreement lawyers

If you are about to enter into or you are already in a relationship or marriage, and want to pre-determine what happens to your assets in the event of separation, contact us to discuss the possibility of entering into a BFA.

If you have separated from your former partner, and want to discuss how best to document the terms of settlement, seek our advice as to what is the best option for you.

Each of our family lawyers adelaide SA are skilled at preparing, advising on and negotiating BFAs.

What you should know

Wanting to enter into a “pre-nup” with the other party before you decide to live together or marry?

Yes, “pre-nups” as they are called in America, are legal in Australia and known as “binding financial agreements”.

The Family Law Act allows married, de facto and/or same sex couples to enter into legally Binding Financial Agreements with respect to their property.

What are binding financial agreements?

A Binding Financial Agreement (“BFA”) can be entered into at any time, that is:

• Before the relationship or marriage (sometimes referred to as a “pre-nuptial agreement”)
• During the relationship or marriage
• After separation or
• After divorce in the case of married couples.

A BFA sets how, in the event of the breakdown of the relationship, all or any of the property or financial resources of either or both of the parties to the relationship is to be divided.

Indeed, a BFA can deal with all financial and property issues between the parties, including extinguishing claims for spousal maintenance.

While it may be possible for you to reach agreement in writing with your former partner regarding financial issues, such an agreement is not legally binding unless both of you receive legal advice and have your lawyer certify the agreement.

What makes financial agreements binding?

To be binding and enforceable, the following requirements must be complied with:

• the agreement must be signed by all parties;
• before signing the agreement, each party must be provided with independent legal advice from a legal practitioner. The legal practitioner must provide advice about the effect of the agreement on the rights of that party, and about the advantages and disadvantages of entering into the agreement; and
• each party must be provided with a signed statement by the legal practitioner stating that they gave advice to that party. This statement must also be provided to the other party, or to the legal practitioner for the other party.

Provided a BFA complies with the Family Law Act, subject to certain exceptions, the parties are prevented from making an application to the Court for orders relating to the property dealt with in the BFA.

BFA or Consent Order?

Whereas financial issues decided by the Courts under the Act determine whether the property settlement is fair, just and equitable to both parties, a BFA effectively allows the parties to “contract out” of these provisions and thereby prevents the Court from making an order in relation to the parties’ property.

For this reason, the Court has interpreted the legislative requirements for a BFA very strictly, on the basis that, if parties are going to contract out of rights and entitlements as prescribed by the Family Law Act, they should only do so with fully informed consent and understanding of the consequences. The Court is not able to set aside a BFA just because it is “unfair” to one party. Therefore, receiving independent and proper legal advice as to the effect of the BFA is crucial.

Given the uncertainty surrounding BFAs, the preferred option in finalising property settlement matters post separation is to file Consent Orders in the Family Court. The Family Court will review the proposed Orders and, if satisfied that they are fair, just  and equitable for both parties, the Court will make Final Orders in the terms as agreed. Consent Orders, unlike BFAs, can only be set aside if there has been a miscarriage of justice by reason of duress or fraud (including failure to disclose material information).

However, Consent Orders are an option only available to parties to a relationship that has broken down. For parties currently in a relationship, or about to enter into a relationship, a BFA is the only option should they wish to determine how property is to be divided following separation.

Why you need one of our binding financial agreement lawyers

If you are about to enter into or you are already in a relationship or marriage, and want to pre-determine what happens to your assets in the event of separation, contact us to discuss the possibility of entering into a BFA.

If you have separated from your former partner, and want to discuss how best to document the terms of settlement, seek our advice as to what is the best option for you.

Each of our family lawyers are skilled at preparing, advising on and negotiating BFAs.