Before moving in with your partner, you may be wondering if it is possible to enter a prenup to protect your assets. In Australia, we have pre-relationship Binding Financial Agreements instead of prenuptial agreements. Binding Financial Agreement can be made at any time before, during or after a relationship and can be made between married or de facto couples. But what is a Binding Financial Agreement exactly?
Governed by the Family Law Act 1975 (Cth), a Binding Financial Agreement can help you to safeguard your financial assets without the cost, time and stress of going to Court in the event of relationship breakdown. A different section of the Act applies for each type of agreement, but the overall documents themselves tend to be the same.
Below, we explain what a Binding Financial Agreement is and whether this legal contract is the right course of action for your circumstances.
What is a Binding Financial Agreement?
A Binding Financial Agreement (BFA) is a private contract between a heterosexual or same-sex couple that formalises asset and liability division in the event of marriage or de facto relationship breakdown. This legally-binding contract can help to alleviate the emotional and financial stress of separation, facilitating a more amicable, cost-effective and efficient separation or divorce in the future.
A pre-relationship BFA can be entered into at any stage of your relationship, including before you get married or begin a de facto relationship, throughout a marriage or de facto relationship, or during or after a separation or divorce.
Is a Binding Financial Agreement right for me?
Whether or not entering into a pre-relationship Binding Financial Agreement is the right decision for you will be based on your own individual circumstances. Generally, this legal contract serves to protect any kind of financial asset or property you may hold, including:
- Bank accounts
- Real estate
- Vehicles (cars, yachts, etc.)
- Insurance policies
- Future inheritance
- Superannuation entitlements
- Outstanding debts
Usually, it is important to consider a BFA if:
- At the start of your relationship, your financial assets are worth more than those of your partner;
- You may be entitled to an inheritance or valuable gift in the future;
- You own a family business or investment that must be protected;
- You would like to agree on the terms of property division in advance to avoid the risk of going to court at a later stage; and/or
- You have children from a previous relationship who must be looked after financially.
Advantages of having a Binding Financial Agreement
Regardless, there are many advantages that come with entering into a Binding Financial Agreement, some of these include:
1. Quick to prepare and finalise
BFAs are faster to prepare and finalise in comparison to the other option of finaliing a property settlement in Canberra or Queanbeyan, through consent orders. A BFA will become valid when the document is executed by both parties and dated, and when one party completes a declaration of separation. In contrast, Consent Orders become valid once they are sealed by the Federal Circuit and Family Court of Australia.
Currently the Court will review orders within a month of their filing, but if there are no urgent circumstances requiring the orders to be made quickly, you may have to wait for a couple of months before you receive final orders.
Crucially, a BFA must satisfy specific technical requirements in order to be legally binding. These criteria are set out in Sections 90K (for marriages) and 90UM (for de facto relationships) of the Family Law Act 1975. Therefore, it is important to seek professional legal support when drafting your BFA.
At Baker Deane & Nutt, our passionate family lawyers are highly experienced in preparing BFAs. Please contact us today for assistance with this complex legal contract.
2. Certainty for the future
One of the key benefits of a pre-relationship BFA is that it outlines what your financial position will be if you separate. You can be certain of what your future will look like out of the relationship, thereby providing you with financial independence from your partner.
3. Protection of assets
BFAs are a good way to protect any assets that you own prior to a relationship. If you purchased a property prior to the commencement of your relationship, or received a gift from your parents of a substantial sum of money or property.
A BFA can separate any property that you own in your own name from the property pool. In contrast, if you do not enter into a BFA this asset will be seen as a substantial financial contribution made by yourself. Although you may end up with more of the property pool as a whole with this method, you will be unable to sever its entire value from the property pool.
Importantly, BFAs are easier to overturn than Consent Orders. They are not future proof and can be overturned if they do not adequately provide for the maintenance and care of a child of the relationship. The circumstances under which the Court is able to set aside BFAs are detailed in Sections 90K (for marriages) and 90UM (for de facto relationships) of the Family Law Act 1975.
Prepare your Binding Financial Agreement with the help of an experienced family lawyer
While we all look for lasting love, the reality is that many relationships can break down over time. With a Binding Financial Agreement, you can prevent the drawn-out court case, emotional stress and financial worries that can follow separation. This cost-effective solution will protect your hard-earned assets, future income and inheritance, helping to ensure that you and your children are cared for if your relationship takes a turn.
However, BFAs are complex contracts that demand advice and guidance from an experienced family lawyer to make sure that they are legally binding. To learn more, visit our page on Binding Financial Agreements or contact us on 02 6230 1999 for personalised advice.