What is a Binding Financial Agreement?
Couples who want financial security can enter into a Binding Financial Agreement (BFA) at any time during their relationship, this is dependent upon the nature and stage of their relationship. In a Binding Financial Agreement a couple can set out how their property and other assets would be divided if they were to separate. The agreement is intended to avoid conflict and litigation saving you time, money and stress should there be a relationship breakdown.
Types of Binding Financial Agreements:
Prenuptial Agreement (pre-nup):
This is an agreement entered into by a couple prior to marriage. There is a perceived view that a pre-nup is for the wealthy only. However in reality, a pre-nup if drafted carefully, can protect your assets and manage how your assets would be divided in the event that there is a relationship breakdown. If correctly prepared, it can save you time and money in the event of a separation.
Post Nuptial Agreement (post-nup):
This is an agreement entered into after marriage. Some couples are not comfortable discussing their finances during the early stages of their relationship. A post-nup might be a better option for these couples especially when their financial situation might have changed and they wish to document how their assets would be divided in the event of a separation. Particularly if they own businesses, have received an inheritance or a gift from family. The post-nup would help to ensure that the assets can also be given to their children if they wish. Most couples also own pets who are very loved and the post-nup and even the pre-nup can include an agreement about who gets to keep the pet should the parties separate.
Couples can also use a Binding Financial Agreement to deal with issues such as spousal maintenance, e.g., exempting each other from making a claim for maintenance, or specifying maintenance terms in the event of a separation.
This is useful if you are living with your partner in a de facto relationship. It sets out each parties rights and financial obligations while they are living together and what would happen to the asset pool if you separate.
What does a Binding Financial Agreement cover?
- The BFA will include personal details about each individual including their age, occupation, salary, whether there are any children in the relationship.
- The BFA will detail the assets and liabilities brought to or acquired jointly in the relationship including their value.
- The BFA will define the financial rights and responsibilities of a couple during their relationship and in the event they separate.
- The BFA covers financial matters including a division of their property and financial resources in the event they separate.
Benefits of a Binding Financial Agreement
- You can protect pre-existing assets that one party brings to the relationship, especially if one party has a stronger financial position.
- You will create certainty about your financial and legal responsibilities towards each other during a relationship and after if there is a breakdown.
- Clients who enter into a Binding Financial Agreement feel greater certainty moving forward in circumstances whereby there is no suggestion that one will make a claim upon the other in the future.
- You can avoid the difficulties, delay and expense that could be experienced in resolving financial issues if the relationship was to break down.
How do I enter a Binding Financial Agreement?
For a BFA to be valid it requires both parties to have independent legal advice. If you are in any way unsure of the potential impact your relationship could have on your financial situation, we recommend that you seek appropriate legal advice. Our Family Law team is able to offer discrete and practical advice to suit your specific needs and circumstances. If you have any questions in regards to your specific circumstances following a separation, please contact one of our Family Law solicitors on 9523 5535.
Disclaimer: The information contained in this article is provided as general information only. It is not intended to be legal advice and it should not be used or relied on as legal or professional advice.