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Binding Financial Agreements (BFAs)

The Family Law Act (‘the Act’) provides for financial agreements, or ‘BFAs’ that can be made before, during or after marriage or after divorce. BFAs can also be made before, during or after the breakdown of a de facto relationship, including a relationship for same same-sex couples.

If you are presently living with someone (whether married or de facto), or if you are contemplating living with your partner (whether as a married or de facto couple), a binding financial agreement can be made to establish:

• How, in the event of the breakdown of the relationship, all or any of the property or financial resources of either or both parties, is to be dealt with; and
• The payments, if any, to be made for maintenance of the parties and their children during and/or after the marriage.

If you are separated or recently divorced, a binding financial agreement can be made as to how your property or financial resources acquired during the marriage are to be dealt with in the future and also as to the payment of maintenance.

The legal costs associated with the breakdown of a cohabitating relationship can be considerable, placing unnecessary financial strain upon parties at a difficult time. A binding financial agreement can be a very cost effective preventative measure to avoid such a burden. Also a BFA can assist you to avoid the payment of stamp duty in the transfer of property between parties to a relationship on the breakdown of that relationship, saving in many cases tens or hundreds of thousands of dollars.

The Court will uphold BFAs unless there are specific circumstances such as that the agreement was obtained by fraud, including non-disclosure of a material matter, or where there has been a material change in circumstances relating to the care, welfare and development of a child of the relationship and as a result the child or a party with caring responsibility for the child will suffer hardship if the agreement is not set aside.

To minimise the likelihood of the court determining that the agreement is unenforceable due to a change in circumstances it is advisable to include full details of the range of circumstances which have been contemplated by the parties prior to entering into the agreement. We recommend that before entering into a BFA you consider and discuss with your partner the numerous varied circumstances that you may face in the future including:

• the care of a child(ren);
• the purchase or sale of property;
• changes in residence;
• the merging of assets or the joint ownership or assets presently owned separately;
• the accrual or depletion of financial resources;
• the receipt of inheritances or gifts;
• changes in investments;
• your intentions for your estate upon your death.

We tailor all agreements to your particular circumstances, to minimise the possibility that your BFA could be challenged and set aside. We will provide you with sound advice on the legal ramifications of those varied circumstances prior to preparing your BFA. Provided that the legislative requirements and procedure for the giving of legal advice and execution of a financial agreement are met, the agreement will be enforceable.

Over recent years the specific legislative requirements have changed a number of times. For that reason is important to have your Binding Financial Agreement drafted by a legal practitioner experienced in family law matters – our Family Law team includes a number of Accredited Specialists in Family Law, and we constantly review legislation and case law to ensure that our BFAs are compliant with the current legislation and court decisions.

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Pre-Nuptial Agreements

Pre-nuptial agreements, or ‘pre-nups’, are the commonly used names for a Binding Financial Agreement (BFA) made under the Family Law Act, before a couple marries. This type of BFA sets out how the parties’ assets and liabilities are to be dealt with should their relationship breakdown in the future. A similar type of agreement can be made for de-facto and same-sex couples before they commence living together.

These BFAs are useful tools to protect the assets each party takes into a relationship by pre-determining how they should be divided if the relationship fails. They can also provide that certain assets acquired during the relationship, whether by inheritance or as a consequence of one party’s financial contributions, can be quarantined from any property settlement.

Pre-Nuptial Agreements allow couples to negotiate a settlement of financial issues in advance and minimise the need to engage in Court proceedings in the future. By resolving any property disputes before they might arise a well drafted Pre-Nuptial Agreement enables couples to move forward in their relationships without the worry of having to protect their or their family’s assets from any claim in the future.

For more information on Binding Financial Agreements, click here.

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De-Facto Relationship Agreements

Recent amendments to the Family Law Act (‘the Act’) have brought de facto relationships and same sex couples under its jurisdiction for property adjustment. Those amendments, which came into force on 1 March 2009, include provisions for de-facto couples, whether heterosexual or same sex, to enter into Binding Financial Agreements (‘BFA’) either before, during or after the breakdown of their relationship.

Importantly, de-facto and same sex couples now have the same rights under the Act as married couples, with respect to property settlement where:

• the parties have been living together for 2 years or more or
• where significant contributions to property have been made or
• where children are involved.

If you want to preserve the assets you are bringing into your relationship or assets that you may inherit, purchase or build up during the relationship, then a Binding Financial Agreement can be drafted to provide this for you.

For more information on Binding Financial Agreements, click here.

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Co-Habitation Agreements

Co-habitation Agreements, or de-facto relationship agreements, can be entered into by couples who are living together, or intending to live together, but who do not intend to get married. Those Agreements, which must be drafted in accordance with the legislative provisions of the Family Law Act, can be utilised by any couple, whether heterosexual or same-sex.

These Binding Financial Agreements, or BFAs, can be used to protect the assets an individual brings into a relationship, or assets that you may inherit, purchase or build up during a relationship. By setting out how all of the assets and liabilities are to be dealt with if the relationship should breakdown in the future you can avoid the emotional and financial expense of a property settlement dispute.

People who are living together, but who are not a couple, can also make an Agreement for the protection of their assets under the NSW Property (Relationships) Act 1984. These are called Domestic Relationship Agreements. A domestic relationship is defined as a de facto relationship or a close personal relationship between two adult persons whether or not related by family, who are living together, one or each of whom provides the other with domestic support and personal care.

Just as with Binding Financial Agreements under the Family Law Act, domestic relationship agreements must comply strictly with the legislation if they are to be enforceable. We have extensive experience in drafting agreements under the Property (Relationships) Act and the Family Law Act and will consider all aspects of your assets and circumstances to ensure your agreement affords you the best protection possible.

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Separation Agreements

Couples who have separated after 1 March 2009, whether married or de facto, can enter into a Binding Financial Agreement (BFA) under the Family Law Act which formalises an agreement as to how the assets and liabilities of their relationship are to be divided, and what, if any, maintenance is to paid to either party. These BFAs are sometimes referred to as separation agreements.

It is important, after a relationship ends, to obtain final orders for property settlement to bring an end to any future claims. This can be done in the form of Court orders or a BFA. Once final orders are made your financial relationship with your ex partner will be over – and neither party can make a claim on the other’s property in the future (except in exceptional circumstances with express permission from the Court).

The benefit of executing a BFA, rather than obtaining Court orders, is that there is no requirement for the Family Court to approve the terms of a BFA. Couples can decide to divide their assets and liabilities as they think fit, and providing that the legislative requirements and procedure for the giving of legal advice and execution of a financial agreement are met, their BFA will be enforceable.

For more information on Binding Financial Agreements, click here.

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