A Financial Agreement is often referred to as a “Binding Financial Agreement”, a “BFA” or a “Pre-nup or Pre-nuptial Agreement”. They are agreements that can be entered into between the parties to a relationship which outline how the parties property and financial resources are to be dealt with if the relationship breaks down. They can also detail arrangements for the payment (or non-payment) of spouse maintenance.
A Financial Agreement can be entered into at various stages of a relationship or marriage, including:
- Prior to co-habitation (living together).
- Before marriage (a “pre-nup”).
- During marriage or a de facto relationship.
- After separation.
- After a divorce.
These types of agreements can allow parties to have some certainty and peace of mind about how their assets will be dealt with in the event of separation. This can be particularly relevant where one party is bringing significant assets to the relationship and the other is not.
A Financial Agreement can only be entered into after each party has received independent legal advice. The solicitors will need to sign a Statement of Independent Legal Advice which is annexed to the agreement
Our specialist family lawyers can assist you with the preparation of a Financial Agreement or the review and negotiation of an Agreement prepared by your spouse’s lawyer.
What are the advantages of a Financial Agreement?
A Financial Agreement can offer certainty, at the beginning of a relationship or marriage, about how certain property or financial resources will be dealt with if the relationship breaks down. Sometimes, they are used to protect a specific asset, particularly if those assets were owned by one party prior to the relationship. Other times, they may be used to quarantine a prospective inheritance or protect an inheritance for children from a previous relationship.
BFA’s are not required to be “just and equitable” in the same way that a Consent Order is which means that they can be used where a settlement reached between the parties is out of the ordinary.
What are the disadvantages of a Financial Agreement?
Financial Agreements are not registered or approved by the Court. That means that if you need to enforce the term of the Agreement, you must first apply to the Court for a declaration that the Agreement is binding, valid and enforceable. This can be an expensive process.
A Financial Agreement can only be terminated by the consent of both parties and by entering into a Termination Agreement. Therefore, unless you are able to have the Agreement set aside by the Court, you will be bound by the terms of the Agreement whether or not you believe them to be fair at the time.
Can a BFA be set aside?
In limited circumstances, the Court can set aside a Financial Agreement. This can be a lengthy and expensive process however, depending on the circumstances of the parties, it may be worthwhile economically. The reasons why a BFA could be set aside by the Court include:
- Where one party has committed a fraud (including the non-disclosure of a material asset);
- If a party acts in an unconscionable way;
- If a party has been placed under duress to enter into the Agreement;
- Where there has been a significant change in circumstances since the Agreement was entered into, relating to the care and welfare of children; or
- Where the terms of the Agreement are no longer practicable to carry out.
If both parties agree to terminate a Financial Agreement or enter into a new one, they can do so by having an new agreement drafted which replaces the earlier agreement.
For de facto couples, a BFA will automatically terminate upon the parties marrying each other.
Financial Agreements are complex and can have significant flow on effects. You should not rush into a Financial Agreement. Time should be taken to carefully consider and negotiate the terms. In relation to “pre nuptial” agreements, these should be negotiated and finalized well in advance of the marriage.
Who should consider getting a Binding Financial Agreement?
If you are starting a relationship or planning to get married and have family wealth, significantly more assets than the other party, a blended family or future inheritance issues then you should speak to a family law specialist about a Financial Agreement.
Similarly, if you operate a business with one or more business partners, a Financial Agreement can protect your business by setting out how it is to be dealt with in the event of a separation. This will give not only you but your business partners peace of mind and ensure that your business is not affected by a relationship breakdown.
You may also wish to consider a Financial Agreement if you have already separated, and the settlement reached is not something the Court may consider just and equitable and/or you wish to protect yourself from any future claim for spousal maintenance.
