Binding Financial Agreements

A financial separation agreement (FSA) is a binding legal contract between two individuals in a marital or de facto relationship. This contract details how the parties will divide their properties, assets, debts, and finances upon separation and is very similar to a prenuptial agreement.

The parties to this type of contract are typically married couples who are cautious about a potential divorce and those in a de facto relationship who may eventually separate. They usually use it as evidence proving who gets what if they decide to separate. 

If the parties of a financial separation agreement have a child under the age of 18, the contract will also include parenting arrangements. It will contain factors like child support and parenting arrangements.

A prenuptial agreement or binding financial agreement is a formal contract, most commonly signed before marriage between two persons who intend to get married. It generally requires each individual to list the properties they own as well as any debts they may have that will be taken into the marriage. 

The essence of a prenup is to secure the properties of the parties if they get a divorce. Without a prenup, a divorcing couple will have to divide their assets. There is a risk that this division may be unequal and one party may lose most of their property to the other party.

A Binding Financial Agreement can actually be entered into before, during or after a relationship.

The short answer to this is yes, prenuptial agreements are binding in Australia. However, the official name under Australia’s family law system is Binding Financial Agreement (BFA). It is governed by Section 90B of the Family Law Act 1975. Under this law, a prenuptial agreement is binding and enforceable so long as it meets certain requirements, including:

• Both parties must have signed the agreement of their own volition, without fear or pressure and preferably in the presence of two witnesses.
• They must have obtained independent legal advice before signing the contract. At VM Family Law, we have years of experience in financial agreement family law. With our knowledge and experience, we are in the best position to provide you with expert legal advice on the terms of your BFA. 
• The independent financial agreement lawyers must have included signed statements affirming that they advised the relevant parties about the legal effect of the contract. These statements are usually referred to as Certificates of Independent Legal Advice.
• Both parties must have retained a copy of the BFA each.

Some of the advantages of binding financial agreements are:

• It allows the parties to determine how their assets and resources will be divided if they choose to separate in the future.
• A binding financial agreement does not require a Court’s approval or involvement. Therefore, it saves the parties the time and cost of engaging in litigation or other dispute resolution mechanisms if they eventually decide to separate.
• It reduces animosity between the parties involved and helps them to end their relationship amicably.
• It protects the parties’ valuable assets like family heirlooms, premarital property, and any businesses owned.
• It affords the parties privacy if they end up separating. This is because only the parties and their financial agreement lawyers are involved in working out the terms of the contract. This is unlike court proceedings which tend to be open to the public.

Despite the benefits of binding financial agreements, they are not without disadvantages, some of which include: 

• The court does not perform any supervisory role when parties are entering into the binding financial agreement. Therefore, it is important that both parties seek legal advice from a financial agreement lawyer before entering into the contract. 
• Binding financial agreements typically do not cover third parties. 

• The binding financial agreement requires that each party obtain legal advice concerning the terms of the contract. So, it takes time and money to prepare one.
• The law of the binding financial agreement can be difficult and if not properly drafted according to the requirements of the law, the Court can void or set aside the contract.

A binding financial agreement should include:

• The full names, addresses, and dates of birth of both spouses.
• A short description of when the relationship started and when the parties intend to get married.
• A list of the properties individually owned by the parties, as well as properties they are to inherit.
• Details of the parties’ individual liabilities such as debts owed.
• A description of the parties’ individual financial resources
• Details on how the various assets are to be used after the marriage if it comes to an end.

Note, you should always engage the services of a financial agreement lawyer to draft a BFA. Our financial agreement lawyers here at VM Family Law are experts in drafting and reviewing BFAs. We will make sure that your rights and interests are best protected. 

The court can set aside a binding financial agreement under certain circumstances as provided in the financial agreement family law. They include:

• When the agreement was obtained by fraud.
• The purpose of the agreement was to defraud.
• The terms of the agreement are unfair to one of the parties.
• New circumstances arise that make the agreement impracticable eg. the birth of a child.
• Misrepresentation of facts in the agreement with the intent to deprive a party of certain assets.
• Failure by one or both parties to disclose any of their assets.

Yes, the parties to a binding financial agreement can decide to overturn the contract together. They may do so by creating a new binding financial agreement or by simply terminating the agreement. If they choose to create a new contract, they would have to state why they chose to terminate the old BFA in the new one.