What is a Binding Financial Agreement?
A binding financial agreement is a term used in Australia to refer to a legally binding financial arrangement.
Pre-nuptial agreements, also known as binding financial agreements (BFAs), are a contract or series of documents that control your property interests in the event of divorce or dissolution of a de facto relationship during the course of your marriage.
A pre-nuptial agreement is a contract or series of documents that control your property interests in the event of divorce or dissolution during the course of your marriage. Depending on the circumstances, you can engage in a binding financial agreement (BFA) before to, during, or after a relationship. A legally enforceable financial arrangement must be entered into within twelve months after the filing of a divorce petition unless it was made after the marriage was terminated.
What Do You Have to Do to Get a Binding Financial Agreement?
The Family Law Act describes the steps that must be followed before a binding financial agreement (BFA) may be regarded as legally binding. Each party must get independent legal advice on relevant matters, and a certificate explaining the advice received must be affixed to the Agreement and signed by each legal advisor, according to the terms of the Agreement.
Importantly, before the agreement was signed, it must include a statement from each party stating that the party obtained independent legal advice on their rights, as well as the advantages and disadvantages of entering into the agreement at the time the advice was provided to the party of entering into the agreement; and Either before or after signing the agreement, each party was provided with a signed statement by a legal practitioner certifying that the advice with a legal practitioner was obtained before the agreement was signed.
Considering a Binding Financial Agreement or Consent Orders?
Important Issues to Consider with Binding Financial Agreements
When it comes to financial agreements, there is a range of subjects that may be covered, including the division of property, the settlement of debts and other financial responsibilities, spousal support, and other matters.
An agreement to separate must comply with the requirements set out in the Family Law Act in order to be legitimate and enforceable. This includes the need that each party enter the BFA of their own free will and with a full understanding of the agreement’s provisions.
Before a contractual agreement may be recognised as legitimate, each party must sign a declaration confirming that they have retained their own independent legal advice.
When is a Binding Financial Agreement Void?
A BFA is void or unenforceable if it was obtained through fraudulent means, including material non-disclosure (for example, by failing to disclose an asset), if a party entered into the BFA with the intent of defrauding or defeating a creditor, if the agreement was not properly prepared and does not comply with the legislative requirements set out in Section 90G or Section 90UJ, or if circumstances have changed since the BFA was obtained.
When a Binding Financial Agreement comes to an end, it can be done so in one of two ways: either by mutual consent or by judicial order.
There are two options for the parties: either they can enter into another financial agreement, as long as a specific provision in the new agreement specifies that the previous agreement is terminated, or they can enter into a “termination agreement” pursuant to Section 90J (for married couples) or Section 90UL (for unmarried couples).
A Binding Financial Agreement (BFA) can be canceled by a court under Section 90K or 90UM of the Family Law Act if one or more of the following requirements are met:
- Evidence of deceit or fraud has been discovered (this could include a failure to disclose assets or liabilities at the time the agreement was made).
- If the arrangement was entered into solely for the purpose of cheating or defeating a creditor, or if the agreement was entered into with reckless disregard for the interests of creditors, the agreement will be considered fraudulent.
- As a consequence of the agreement or as a result of the agreement’s impact on a child of the parties, one of the parties is experiencing financial difficulties.
- The agreement is judged to be null and void, or in some other way unenforceable. An example of such an event might be due to a clerical error, a violation of public policy, fraud, or duress on the part of one party at the time of execution, a breach of agreement, or unconscionable behaviour on the part of the other party.
- A change in the circumstances of either one or both of the parties involved causes the agreement to be deemed impractical in this situation.
- A difficulty with superannuation, for example, can arise, and the agreement might provide that the superannuation interest in question cannot be separated.
Considering a Binding Financial Agreement or Consent Orders?
Binding Financial Agreements Questions
Here are the most commonly asked questions, answered.
If my relationship ends and I do not have a legally enforceable financial agreement, what happens to my assets and debts?
You and your former partner/spouse will need to negotiate a property settlement or submit an application with the Family Court to have a determination made in the event of a relationship ending without a valid separation agreement in place.
Is it feasible for me to prepare my own BFA?
Your BFA must be written by a lawyer who will only work on your behalf and only on your behalf. The first step in achieving a BFA is to have a chat with your spouse about the circumstances that warrant your consideration. It is impossible to proceed if your spouse is adamant about not entering into a binding financial agreement (BFA).
Are BFAs recognised by any other names outside their formal title?
Pre-nuptial agreements, post-nuptial agreements, cohabitation agreements, separation agreements, and divorce agreements are all phrases that are used to refer to legally enforceable financial arrangements between two individuals.
Why is it vital to protect your financial assets?
It’s vital that you take the required steps before getting into a relationship in order to protect your own possessions and avoid losing them.
When the following circumstances exist, it is essential to consider a legally binding financial agreement:
In the early stages of a new relationship, you have more money, property, or assets than your partner; you may be entitled to an inheritance or large gift at a later stage; you run a family business or have an investment that you want to keep; you want to make sure the terms of any property division are agreed upon upfront to avoid going into court later; you have children who need to be financially protected.
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What is the difference between a BFA and Consent Orders?
Consent Orders are an alternative to entering into a Binding Financial Agreement (BFA), and they are commonly used to resolve property division issues.
Obtaining a Consent Order through the Family Court of Australia is a legal procedure that is intended to put an end to the financial issues that have arisen between the two parties once and for all. Consent Orders are exactly what they sound like; they are court orders that are entered into with the consent of both parties involved. For this reason, if you and your partner have agreed on the terms of a divorce settlement and your partnership has come to an end, Consent Orders may be the most appropriate solution.
In comparison to a Binding Financial Agreement, the advantage of Consent Orders is that they do not need the parties to get a certificate of legal advice in order for them to be considered legally binding. Additionally, after consent orders have been granted, it is more difficult to get the orders reversed or modified.
The application of consent orders must be reasonable and equitable in all circumstances.
Prior to using its authority to issue consent orders, a court must be satisfied that doing so is reasonable and equitable in the particular situation. Once this has been completed, the court must be persuaded that the proposed orders are reasonable and equitable in nature. An order must be fair to all parties and fall within the range of plausible outcomes that may have happened if a judicial judgment had been issued, according to a court’s determination of what is “just and equitable.”
A legal responsibility to be just and equitable in line with the criteria used by the Family Court in making its finding does not exist since Binding Financial Agreements are not sanctioned by a court. Depending on the circumstances, the parties may come to an understanding that the contents of the agreement constitute a reasonable conclusion in light of the current circumstances. For example, parties may come to an agreement on the terms of a contract because of practical considerations.
Financial Information That Must Be Disclosed
When orders are being examined by the Family Court, it is a necessity that the parties provide each other with complete and fair disclosure of all financial information, including any docs that may be relevant to the case. In some situations, failing to comply with these requirements may result in a miscarriage of justice, with the potential that the orders will be reversed by a court of competent jurisdiction.
As a result of this, binding financial agreements are free from the requirement to provide financial disclosures. By signing the agreement, the parties to a BFA agree to forgo their respective rights and responsibilities under the Family Law Act. Included are not only the conditions of the property settlement but also the pre-action procedures of the court, such as the requirement to give financial information, among other things.
A BFA, on the other hand, may be set aside in the event of nondisclosure of a material truth if the nondisclosure is the result of fraud on the part of the parties.
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Let’s Sign a Binding Financial Agreement the Night Before Marriage?
Prenuptial agreements signed just days before a wedding run the danger of the financially weaker spouse subsequently claiming they were forced to sign. The fact that the financially weaker spouse was forced to sign the agreement and that the wedding would have been canceled if they had not signed is a red flag.
If you hired a lawyer to draught a prenuptial agreement for your partner to sign, they should be given enough time to examine the agreement and your financial disclosure, seek independent legal advice, and negotiate any changes to the terms. If they aren’t, this could lead to the agreement being thrown out in the future.
We propose that couples prepare, negotiate, and sign a financial agreement well before wedding plans are finalised and invitations are sent out. This is due to the fact that formulating and negotiating the parameters of a financial agreement usually takes months rather than days.
De facto couples who want to move live together or celebrate two years of living together should see a family lawyer at least six to nine months ahead of time.
After marriage, a financial agreement can be made in the same terms as a prenuptial agreement. The financial agreement would simply need to refer to a separate provision of the Family Law Act, such as section 90B for agreements made before marriage and section 90C for agreements made after marriage.
The same is true for de facto partnerships; section 90UB applies to couples who are thinking about starting a de facto relationship, while section 90UC applies to couples who are already in one.
When the wedding date is only a few days or weeks away, signing a financial arrangement after the wedding is a much safer option. If the wealthier spouse perceives a loss of bargaining power (noting that they must be cautious in their communications with their spouse to avoid any suggestion that they are pressuring them into signing the agreement), they should consult an expert family lawyer as soon as possible and months before their wedding.
Please do not hesitate to contact one of our team’s experienced family lawyers if you need help preparing or evaluating your financial arrangement.
Is it possible for a court to overturn a binding financial agreement?
If a BFA is not carefully constructed and properly executed, it may be struck aside by the Family Court. The following are the most prevalent reasons why BFAs are set aside:
- The BFA was gained by deception or pressure (for example, forcing someone to sign the BFA soon before the parties’ wedding under threat of the ceremony being cancelled).
- A party neglected to disclose key assets or information under the Agreement.
- The Agreement was entered into with the intent to defraud or defeat a creditor, or with reckless disregard for a creditor’s interests.
- Significant changes in either or both parties’ circumstances have made it impossible to carry out the terms of the agreement.
- There has been a change in circumstances involving a child since the Agreement was made, and if the Agreement is not set aside, it will cause hardship for the child or their caregiver.
If the Agreement is overturned, each party is allowed to file a property settlement application with the court, just like any other separated couple.
What to do next?
At Mediations Australia, we have a team of family lawyers and mediators who can assist you in Canberra, Perth, Adelaide, Melbourne and all other locations in Australia. We also do international family law matters.