In 2005, Kanye West told us "We want prenup! We want prenup!" (Yeah!).”
Fast-forward to now, and agreements of this nature are more popular than ever.
In Australia, the legal cousin of a pre-nupital agreement is a Binding Financial Agreement (BFA). A BFA is an agreement between married, soon-to-be-married and de facto couples that states how assets and liabilities will be divided upon termination of the relationship and can be entered at any point of the relationship – even after separation.
By signing a BFA, parties enter a contract rather than seeking division through the Family Law Courts. This can present many advantages, such as avoiding the delay, costs and uncertainty of the Family Courts, as well as being a practical way of achieving greater financial security.
What is included in a BFA?
Only assets and liabilities are included in a BFA. Whilst some people may choose to divide ownership of Tupperware and linen, this is not necessary. Full disclosure of assets is paramount - this means that honesty is necessary. Failure to mention the secret beach house at Victor Harbor may result in an invalid agreement!
How is a BFA created?
There are certain elements needed to create a BFA. These are outlined under section 90G of the Family Law Act 1975:
· The agreement must be in writing.
Before signing, each party must be provided with independent legal advice as to how the rights of the party are affected and the advantages and disadvantages of the agreement at the time. This means that parties must engage with a legal practitioner.
· All parties to the contract must sign the BFA.
· Each party must be provided with a signed statement by the legal practitioner stating that the advice referred to above was provided to that party.
· The agreement must not have been terminated or set aside by the court.
In some cases where the requirements above are not met, it is possible that the Agreement remains binding if the courts find it is unjust and inequitable to set it aside.
When is a BFA not binding?
If the elements of a BFA are not met, it will be invalid.
Where the circumstances are so extreme and unfair that it would be unconscionable to uphold an agreement that satisfies all the elements of a BFA, it will be set aside.
Are BFAs still relevant?
Caution is likely to be applied in approaching cases where one party is so disadvantaged that the agreement is ‘unconscionable’.
However, if the parties have sufficient time to have a legal professional carefully draft a BFA and satisfy all the requirements under the Family Law Act, there should rarely be a reason to have it set aside by the courts.
These agreements should remain vital in asset protection strategies at any stage of a relationship.
Should I consider having a BFA in place?
You may want to consider entering into a BFA during your relationship if:
· You own a business and you want to protect your shares and assets.
· Your partner has large debts and you do not want the responsibility of paying each other’s debts.
· Your income is higher than your partner’s and you want to protect yourself from potential claims for spousal maintenance.
· You have brought more assets and financial stability into the relationship and you want to protect yourself and your assets from any future division claims.
· Your income is less than your partner’s and you want to ensure that your financial status is protected in the future should a breakdown of the relationship occur.
· You are going through a separation with your ex-partner and there will be a division of assets and liabilities.
How can we help you?
It is important that an experienced lawyer prepare and provide substantial advice on your BFA. Our staff at CPC Lawyers are experienced in dealing with complex family law matters associated with significant financial assets.
If you want to have a legally binding financial agreement drawn up, or want to further discuss your options, please contact us on (08) 7325 0219 or info@cpclawyers.com.au.
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