A Binding Financial Agreement (BFA), also known as a Prenuptial Agreement, is a technical and legally binding document that sets out how a couple’s assets will be divided in the event of a relationship breakdown.
The objectives of a BFA are:
- To protect the assets each party had at the beginning of the relationship; and
- To divide jointly-acquired assets. Usually these are split equally, but you can decide to split them differently, as long as you both agree.
Having a BFA in place provides certainty in relation to the division of assets and can be carried into effect without having to go to court, saving time and money.
Who should get one and when?
Newly married couples and those embarking on a new defacto relationship may wish to organise a Binding Financial Agreement with the help of a solicitor experienced in family law. You can, however, seek a BFA at any stage of the relationship, even when you are separating or divorcing.
A BFA should be sought if you:
- have been separated or divorced before;
- have children from a previous relationship;
- own real estate or other significant assets;
- have greater debts than your partner and want to protect them;
- earn a healthy income;
- have received significant gifts from your parents or other relatives;
- are likely to receive an inheritance in future;
- are a beneficiary of a trust of your parents;
- are a business person and want to prevent other stakeholders in the business becoming involved in a personal dispute;
- have come to an agreement about how to divide assets after separation.
What are the laws in Qld?
Married and defacto couples in Queensland can enter into a Binding Financial Agreement. The Family Law Act 1975 (Commonwealth) sets out the formalities a BFA must comply with to be legal and binding.
Section 90G of the Act states each party must receive their own independent legal advice in order to complete an enforceable BFA.
The Act also provides each party with the right to a property settlement after separation. It’s important to note that by entering into a financial agreement, each party gives up this right and is bound to the division of assets (and liabilities) that are recorded in the agreement. A financial agreement can be amended or cancelled any time as long as both parties agree.
What’s In a Binding Financial Agreement?
BFAs usually include clauses in relation to the financial settlement such as:
- Property, including the division of superannuation entitlements;
- The agreed financial arrangements for children;
- The financial support provided from one party to the other (spousal maintenance).
The main advantage of a Binding Financial Agreement is that is can be specifically tailored to suit your needs. Since BFAs are complex contracts, it’s important that it is prepared by a skilled and reputable law firm. The last thing you want when going through the stress of a relationship breakdown, is for the Family Court to set aside your financial agreement on the basis that it is not legal or binding.
Whether you are just living together or are about to be married, a Binding Financial Agreement shouldn’t be about expecting the worst. Rather, think of it as an insurance policy that doesn’t require premiums be paid each year!