Binding Financial Agreements (BFA) are commonly referred to as prenuptial agreements or prenups. They are available to the parties (or prospective parties) to a marriage or de facto relationship in order to settle the way in which their property interests will be adjusted should their marriage or de facto relationship breakdown. Prenuptial agreements are drafted to reflect the parties’ agreed arrangements for the division or transfer of property, splitting of superannuation interests, maintenance of a spouse, provision for children or any other financial issues that may arise on the breakdown on the relationship. They can be created in contemplation of marriage or a relationship, during a marriage or a de facto relationship or following separation.
Binding financial agreements are often challenged in the Family Court. It is therefore important that the agreement is properly negotiated and drafted. This involves complying with the strict criteria set out in the Family Law Act.
For an agreement to be binding it must be signed by both parties and by their lawyers. Prior to signing each party must receive independent legal advice from a legal practitioner about the effect of the agreement on the rights of that party and the advantages and disadvantages to that party making the agreement. Whilst disclosure of each party’s financial circumstances is not a formal requirement it is prudent to include such information. Doing so will help reduce the risk of having the agreement set aside and will greatly assist your lawyer to formulate the advice. It is also important that you raise key concerns or issues with your lawyer so that the agreement can be properly crafted to suit your circumstances, and your wishes. And, being a contract, the binding financial agreement must comply with principles of the law of contract.
A binding financial agreement may also make provision for the care, welfare and development of a child. If a party has increased responsibility for the child and the agreement does not address the change in circumstances it might be set aside if the party is to suffer hardship. An example of hardship may be that after separation one party has to support him or herself together with the child and the other party does not provide adequate child support.
There are many grounds upon which a BFA might be set aside. So many as to raise the question of whether they can really be called binding at all. And certainly too many to traverse in this short article.
Parties to a relationship should also be aware that there are other, sometimes preferable, methods for formalising the division of property at separation. A property settlement achieved through a court order has the advantage that the division of property will be binding and more difficult to challenge at a later date when disputes become more emotive. Such orders cannot, however, be achieved prior to the commencement of marriage or a de facto relationship. For that there is either a prenup or the abyss of love. And sometimes both.
Contact us now to discuss whether a binding financial agreement or preup might be suitable for your circumstances.