Binding Financial Agreement
1. What is a Binding Financial Agreement?
Binding Financial Agreements are colloquially referred to as:-
- Pre-nuptial Agreements (pre-nup)
- Post-nuptial Agreements (post-nup)
- Cohabitation Agreements
- Separation Agreements
A Binding Financial Agreement allows a party to a de facto relationship or marriage (same sex or opposite sex) to agree to the division of property in the event of separation. This enables the parties of a relationship to have certainty and control over their future financial position, without proceeding to Court.
2. Why should I obtain a Binding Financial Agreement?
In view of the increase in second marriages and blended families, or where one party has accrued significant wealth in comparison to their significant other, a Binding Financial Agreement can:
- Remove the financial stress of separating and allow the couple to amicably separate without the need for costly litigation.
- Provide protection to assets brought into the relationship and future inheritances;
- Safeguard the inheritance to be provided to a child from a previous relationship.
- Provide protection of a family farm or business.
- Assist with Estate planning.
3. When can a Binding Financial Agreement be entered into between a couple?
A Binding Financial Agreement may be made:
- Before marriage;
- During marriage;
- After a divorce order is granted by the Court;
- Before a de facto relationship;
- During a de facto relationship;
- After the breakdown of a de facto relationship.
4. What are the requirements of a Binding Financial Agreement and can I prepare this myself?
In order for a Binding Financial Agreement to be binding the following requirements must be met:-
- All parties must sign the agreement;
- Prior to signing the Agreement, each party must obtain independent legal advice from an Australian legal practitioner about the effect of the Agreement and the advantages and disadvantages of signing the Agreement.
- Each party must obtain a signed Statement from their Australian legal practitioner providing that they have received independent legal advice and provide this statement to the other party.
- The Agreement has not been terminated or set aside by the Court.
- Each party has provided full and frank disclosure of their financial position.
Accordingly, while you may prepare a Binding Financial Agreement yourself, it will not be binding on the parties if the above strict legislative requirements are not met.
To ensure all legal requirements are met and to avoid the Binding Financial Agreement being set aside, we recommend that you contact one of our experienced family lawyers.
5. Can a Binding Financial Agreement be set aside?
Generally, a Binding Financial Agreement may be set aside by the Court if:-
- There has been a failure to disclose a material matter, including insufficient disclosure of property.
- The agreement is void, voidable or unenforceable (e.g. the agreement does not meet the strict legislative requirements and is defective or one party places unreasonable pressure or coerces the other party to sign the Agreement; or
- One party has entered into a Binding Financial Agreement to defeat or defraud creditors; or
- It is impractical for the Binding Financial Agreement or part of the Agreement to be carried by reason of a change in circumstances; or
- A material change in circumstances has occurred, for instance, the couple have had a child and appropriate care must be provided.
- The Binding Financial Agreement covers a superannuation interest that cannot be split.
6. What happens if my relationship breaks down and I do not have a Binding Financial Agreement?
You and you partner will need to enter into negotiations regarding the distribution of your property.
Where agreement is reached
If you and your partner reach agreement as to how to divide your property following separation, you may elect to enter into:
– A Binding Financial Agreement after separation; or
– Consent Orders filed with the Family Court of Australia. The Court will review the Orders sought by the parties to ensure that they are just and equitable.
Where there is no agreement
If you and your partner cannot agree to the division of your property, you will need to apply to the Family Court of Australia or the Federal Circuit Court of Australia to determine the division of your assets after separation.
Please note that time limitations do apply for parties seeking assistance from the Court.
Court intervention is often a lengthy and costly process, without certainty. This can be avoided, if you and your partner enter into a Binding Financial Agreement.
In order to protect your assets and prevent Court proceedings, we strongly recommend that you obtain a Binding Financial Agreement.
Key factors to take into account when agreeing on the terms and conditions of a Binding Financial Agreement:-
- You and your partner’s occupations and future capacity to earn an income.
- Your current assets including chattels, vehicles, shares, furniture, valuables, jewelry or sentimental items which you may wish to include in the Agreement.
- The current value of the above assets.
- The current market value of your property and any other property you intend to own personally.
- Details of your liabilities including any loan, mortgage or debt owing.
- Whether there is any other family law financial agreement to which you or your partner are a party.
- The date when the cohabitation commenced between your partner and you.
- The date when the relationship commenced between your partner and you.
- Whether you or your partner have been married previously.
- Children– how many and what age.
Please do not hesitate to contact our experienced Family Lawyers on +61 3 9500 1722 or email an enquiry.