Binding Financial Agreements – do you, or your children need one?
Couples contemplating or moving in together or marriage should consider entering into a pre-nuptial agreement, now more properly known as a ‘Binding Financial Agreement’. But how do they work?
A ‘Binding Financial Agreement’ is a risk management tool that can act like an insurance policy to determine what happens to certain assets that either party wants to protect. These documents simply deal with the division and ownership or some or all assets in the event of a relationship breakdown. You have flexibility as to how you wish your assets to be split, and can take into account the assets you have each brought into the relationship and your individual income throughout the relationship, and can take your superannuation balances into account.
The benefit of having a Binding Financial Agreement prepared early in the relationship or before marriage is that it clearly sets out the terms as to how your assets will be split before entering into arrangements to repay loans, accumulating joint assets etc. This provides both partners (and their families!) with a level of confidence that in the event of a relationship breakdown, the split of the couple’s finances is already determined and agreed on.
Couples are free to make their own arrangements, but must obtain independent legal advice for the agreement to be binding. If independent legal advice is not obtained the courts will have power to set aside the agreement and deal with the property as they see fit.
Normally the courts will not be able to overturn a Binding Financial Agreement (“BFA”). Situations where a BFA may be overturned are:
- The agreement was obtained fraudulently
- The agreement is void, voidable, or unenforceable under the law of contract
- It is now impracticable for the agreement to be carried out
- There has been a material change in the responsibility of caring for a child
- One of the parties is deemed to have engaged in unconscionable conduct in making the agreement
- Where the court is of the opinion the agreement was entered into with the purpose of defrauding or defeating creditors of one of the parties
- There is a technical defect resulting in non-compliance in any way with Section 90G of the Act, which sets out the procedural requirements for such agreements
Tags: BFA, pre-nuptial agreements