Thinking about getting married or entering into a de facto relationship? You might want to look at how you can protect your assets in the event that, for whatever reason, the sweet relationship turns sour.
Read on to learn more about what binding financial agreements are and how they can provide you with certainty and security.
What is a binding financial agreement?
Under the Family Law Act 1975, you may enter into a binding financial agreement (BFA) to manage your assets throughout the relationship. A binding financial agreement outlines how a couple’s property or financial resources will be distributed in the event that their relationship ends.
Furthermore, couples can enter into a BFA before, during, and after the marriage or de facto relationship.
What makes binding financial agreements binding?
Under section 90G of the Act, a BFA becomes binding if:
- all parties signed the agreement;
- each party obtained independent legal advice prior to signing;
- each party received a signed statement from the legal practitioner stating that they received independent legal advice;
- a copy of the signed statement was given to the other party or their legal practitioner; and
- the agreement has not been terminated or set aside by a court.
A court can set aside or terminate a BFA if:
- the court has proven that the agreement was obtained by fraud (including non-disclosure of assets);
- the agreement is void, voidable, or unenforceable;
- circumstances have changed since the execution of the agreement that makes it impractical to carry out part of or the whole agreement;
- since the making of the agreement, a material change in circumstances has occurred and, as a result of the change, the child or, if the applicant has caring responsibility for the child, a party to the agreement will suffer hardship if the court does not set the agreement aside; a party engaging in conduct that was unconscionable during the making of the agreement;
- a payment flag is operating under a superannuation interest covered by the agreement and there is no likelihood that the operation will be terminated by a flag lifting agreement; or
- the agreement covers a superannuation interest that is an unsplittable interest.
What should a binding financial agreement include?
When drawing up a binding financial agreement, make sure to include:
- details about the parties
- details about when the relationship started and when you intend to marry (applicable to couples in de facto relationships)
- a list of the assets and liabilities acquired before and during the relationship (both marital assets and separate properties), including their value
- a list of your financial resources and their value
- details on how you want to deal with your assets and resources during the relationship, and how they will be split in the event of the breakdown of the relationship
- detailed procedure for asset distribution upon breakdown of the relationship
What properties can you include in a binding financial agreement?
Except for matters like child support and parenting arrangements, all kinds of property, financial resources–anything that can be valued–can be covered by a BFA. Some examples of property you can include in the agreement are:
- real estate
- bank accounts
- superannuation entitlements
- vehicles (cars, yachts, etc.)
- insurance policies
Are binding financial agreements enforceable?
It’s the court that determines whether a financial agreement is ‘valid, enforceable, or effective’ if there is a dispute to your binding financial agreement. Like any contract, there are risks involved when trying to enforce an agreement. When it comes to proceedings related to such an agreement the court:
- has the same powers and may grant the same remedies in proceedings on contracts or purported contracts;
- has the power to order one party to make a payment of interest on a due and payable amount to another party; and
- in addition, can order that a portion or the whole agreement be enforced like an order of the court.
With the help of a lawyer, make sure that your binding financial agreement is consistent with the principles of law and equity which the court applies to determine the validity, enforceability, and effectiveness of contracts and purported contracts.
Why do I need a binding financial agreement?
While everyone hopes for happy relationships, these can sometimes break down. Couples who have a binding financial agreement set in place at the outset can:
- get security and control over their future financial standing;
- ensure a conflict-free and efficient distribution of assets and liabilities;
- protect their inherited wealth or accumulated wealth in the future;
- avoid costly and time-consuming (and sometimes stressful) family court proceedings.
Get a Binding Financial Agreement
Who says fallbacks only apply to commercial relationships? Having a binding agreement can help you efficiently and effectively deal with division of property and other tricky issues post-relationship.