A Binding Financial Agreement (‘BFA’), commonly referred to as a ‘pre-nup’, is a legal document between parties, and can apply to both married and de facto couples. Essentially, it is an agreement between the parties as to how assets, liabilities and superannuation will be divided in the event of a breakdown of the relationship.
However, BFAs are not only used in circumstances prior to parties entering into a marriage. Couples can enter into a BFA in the following circumstances:
- Prior to marriage or entering into a de facto relationship;
- During a marriage or de facto relationship;
- Following separation, but prior to divorce; and
- After divorce or the breakdown of a de facto relationship.
The advantages of entering into a BFA include:
- The agreement gives parties peace of mind that their assets are protected.
- The agreement is a more cost-effective solution than going through the Court process, as well as less emotionally stressful on parties in the event of separation.
- The property division process can be much more simplified and predictable than the Court process.
- The agreement can be much more flexible to the needs and circumstances of the parties.
- The agreement also protects the parties property and Estate after separation by restricting the other party from claiming on their Estate.
However, there are also disadvantages to entering into a BFA:
- The agreement is not reviewed by the Court to determine whether the terms are just and equitable as within the provisions of the Family Law Act 1975 (Cth).
- If there is a future change in circumstances of the parties that would render the agreement unjust, the Court may overrule the agreement.
- If the document is not effectively drafted, the Court may overrule the agreement.
- The agreement is not registered with any regulatory body or agency, or with the Court.
BFAs are complex legal documents, and require specialised advice to prepare and execute effectively. Additionally, both parties must obtain independent legal advice before entering into a BFA.
The team at Family Focus Legal are highly experienced in preparing Binding Financial Agreements in a range of circumstances, and are able to prepare the required BFA, or provide independent legal advice to a party entering into a BFA. Our team can also discuss whether a BFA is right for you.