When entering into a romantic partnership, it is essential to think about what will happen in the event of a breakup. One way to protect your assets and avoid a lengthy and costly legal battle is by entering into a binding financial agreement (BFA). A BFA is a legal document that outlines how a couple’s assets and liabilities will be divided in the event of separation or divorce. In this article, we will explore the different types of binding financial agreements in Australian law and the requirements needed to make the agreement binding.
Types of Binding Financial Agreements
There are three types of binding financial agreements in Australian law:
1. Pre-Nuptial Agreements: A pre-nuptial agreement is a BFA that is entered into before a marriage or civil union. It sets out how the couple’s assets and liabilities will be divided in the event of separation or divorce.
2. Post-Nuptial Agreements: A post-nuptial agreement is a BFA that is entered into after a marriage or civil union. It sets out how the couple’s assets and liabilities will be divided in the event of separation or divorce.
3. De Facto Agreements: A de facto agreement is a BFA that is entered into by couples who are living together in a de facto relationship. It sets out how the couple’s assets and liabilities will be divided in the event of separation.
Requirements for Making a Binding Financial Agreement
To make a BFA binding, there are certain requirements that must be met. These include:
1. Voluntariness: Both parties must enter into the agreement voluntarily, without any undue influence or pressure from the other party.
2. Disclosure: Both parties must provide full and frank disclosure of their financial position. This includes disclosing all assets, liabilities, and financial resources. Failure to provide full disclosure may render the BFA invalid.
3. Independent Legal Advice: Both parties must receive independent legal advice before signing the BFA. This means that each party must seek advice
from a separate lawyer who is not affiliated with the other party. The lawyer must provide a certificate of independent legal advice, which confirms that they have provided advice to their client on the effect of the BFA, and the advantages and disadvantages of entering into the agreement.
4. Written agreement: The agreement must be in writing and signed by both parties. It should also include a statement signed by each party’s lawyer, stating that they have provided independent legal advice to their client.
5. Certification: The BFA must be certified by a lawyer as being a valid and binding agreement.
6. Proper Execution: The BFA must be executed properly. This means that both parties must sign the agreement, and each party must receive a copy of the signed document.
Once these requirements have been met, the binding financial agreement becomes legally binding and enforceable. However, it is important to note that these agreements are not foolproof and may be subject to challenge in court. For example, if there is evidence of fraud, misrepresentation, or a significant change in circumstances since the agreement was made, a court may set aside the agreement.
Benefits of Having a Binding Financial Agreement
There are several benefits to having a BFA. Firstly, it provides certainty and clarity regarding the division of assets in the event of a relationship breakdown. This can save both parties time and money in legal fees and court costs.
Secondly, a BFA can provide protection for assets that were acquired before the relationship or assets that are considered separate property. For example, if one party owns a business before entering into a relationship, a BFA can protect the business from being divided in the event of a relationship breakdown.
Thirdly, a BFA can provide protection for assets that are acquired during the relationship. For example, if one party receives an inheritance or a significant financial windfall during the relationship, a BFA can ensure that these assets are protected in the event of a relationship breakdown.
Conclusion
In conclusion, binding financial agreements can be an effective way for couples to protect their assets and financial interests in the event of a separation or divorce. However, it is important to ensure that all requirements are met and that both parties receive independent legal advice before entering into such an agreement. This can help to avoid future legal disputes and provide peace of mind for both parties.
