A binding financial agreement (BFA) is a legally binding property settlement. It sets out how a couple’s financial resources and assets will be divided if a relationship ends. BFAs can be made before (pre-nuptial agreements), during or after a marriage or de facto relationship.
Here’s the process.
Quick points
How do you create binding financial agreements in Brisbane?
Step 1: Scope
The scope of binding financial agreements in Australia can be wide. They can be tailored to each party’s individual needs and circumstances. Here are some of the things the scope of a BFA can cover.
Specific assets
Parties in a marriage or de facto relationship can choose to include specific assets in the BFA. This might be real estate, vehicles, businesses, or valuable personal property. A lawyer with extensive experience can help draft a comprehensive settlement that specifies how these assets will be dealt with during the relationship and how they will be divided if the relationship ends. If circumstances change, the individuals may also consider drafting a new financial agreement to reflect their updated arrangements.
Entire Asset Pool
Alternatively, the BFA can cover the entire marital asset pool, serving as a comprehensive guide for property settlement in case the relationship breaks. This broad approach includes all current assets and liabilities, setting out the financial relationship between each individual and how all their financial resources will be dealt with. To ensure the settlement is legally binding and complies with legal requirements, both parties must obtain independent legal advice from a family law expert before signing.
The BFA can also include provisions for specific actions that must be taken by each individual. For example, one party may agree to sell their share of a shared business at a certain trigger event, helping to avoid potential disputes and reduce legal fees in the future.
Superannuation
Superannuation is a big asset for many Australians. A BFA can include provisions on how superannuation benefits will be split or retained by each individual if the relationship ends. There are specific superannuation splitting laws that govern how super interests are dealt with in binding financial agreements. Each individual must get an accurate valuation of the interest from the trustee.
Spousal Maintenance
The agreement can include provisions for spousal maintenance, offering financial clarity on whether one party will provide financial support to the other after the relationship. This support is typically outlined in a written agreement, ensuring that both individuals understand their rights and obligations. Spousal maintenance is usually determined by a party’s access to financial resources, earning capacity, and the other party’s ability to pay. Including such provisions can be instrumental in protecting assets and avoiding disputes that might otherwise require intervention by the family court. Factors that the financial agreement may consider are:
Age and health.
Caring responsibilities.
A reasonable standard of living.
Length of marriage.
The financial agreement should also specify how long maintenance will last, addressing certain circumstances that may require extended support. For example, spouses with a disability or long-term caring responsibilities may need maintenance for several years. It is essential to seek independent advice and practical advice from a legal professional to ensure the settlement is fair and sustainable. This is particularly important when maintenance arrangements stem from a former relationship, as they must be clearly defined and aligned with the individual’s needs and obligations.
Step 2: Formalise the agreement
Formalising a binding financial agreement is a multi-step process. Here’s how.
Receive Independent Legal Advice
Both parties, whether in a committed relationship or as de facto partners, must get independent legal advice from a Brisbane family lawyer. This ensures that both parties fully understand their rights and the implications of the financial agreement. The advice covers the pros and cons of entering into binding financial agreements and may require a signed statement confirming the advice was provided. It will also show how the settlement affects each party’s rights, including those involving a former partner. Financial agreements can have unintended consequences for one side, and clear, good advice is essential to protect each party’s interests.
Financial Disclosure
Both parties entering the settlement must provide full and frank financial disclosure. This means the two parties must provide a complete picture of their financial circumstances, including all assets, liabilities, income, and superannuation. This step ensures the financial agreement reflects each party’s financial situation accurately and forms the basis for a legally enforceable consent order if required. It also provides clarity for potential adjustments that may be required at a later date. This process can be lengthy and costly, depending on the extent of the information that needs to be gathered, but it is essential for ensuring transparency and fairness.
Negotiate the Agreement
The parties will negotiate the terms with their binding financial agreement enforceable lawyer. This negotiation will address the division of assets and liabilities as well as ongoing financial arrangements. The aim is to create a fair and mutually acceptable legal agreement for both parties.
Both parties must act in good faith for the negotiation to be effective. If you cannot agree, mediation may help you find a solution. Involving lawyers in the mediation process can help streamline negotiations and ensure the agreement complies with the Family Law Act. This ensures the agreement is binding financial, legally sound, and enforceable, providing clarity and security for both parties.
Draft the Agreement
Once the terms are agreed to, a legal professional will draft the binding financial agreement tailored to the specific needs of the parties. The settlement should be simple and complete, reflecting all the terms agreed between the parties. To ensure it is legally enforceable, both parties must seek legal advice, and the agreement must comply with the Family Law Act 1975. In cases where a party fails to disclose all relevant financial information (non-disclosure), the agreement may be challenged in court.
To avoid such issues, it is often advisable to formalize the arrangement through consent orders, which provide an additional layer of enforceability and reduce the likelihood of disputes being escalated to court. Engaging an experienced family lawyer ensures the agreement is properly drafted and compliant with legal standards, minimizing the risk of future disputes that might require court intervention.
Sign the Agreement
Once the BFA is drafted, both parties sign it in accordance with the Family Law Act. The signatures are witnessed by the binding financial agreement lawyer who drafted it. This step finalises the agreement, making it legally enforceable. In the event of a relationship breakdown, the BFA provides clarity on the division of properties and liabilities. If circumstances change, the parties may need to enter into a termination agreement to formally end or amend the BFA.
Legal Advice Certificate
Each party’s lawyer will provide a certificate confirming that independent legal advice was given to the client. This step ensures that both parties understand their rights and obligations under the agreement, particularly when dealing with complex matters such as a family business, the terms of a prenuptial agreement, or securing their financial future. The certificate is then attached to the BFA, serving as a key component of the agreement’s validity. Taking this step can help avoid disputes and potentially reduce legal costs in the long term.
At Andrews Family Lawyers, we can help you with a Binding Financial Agreement that suits you. Get in touch!
Step 3: Review the agreement
Once you have drafted the agreement, you must keep a copy and be open to reviewing it.
Make Copies for Both Parties
After signing, each party should get a copy of the agreement. Both parties will have a copy of what they agreed to.
Store It
Each party should store their copy of the BFA in a safe place, as it is an important legal document governed by family law. This could be a safe deposit box, a secure filing system at home, or another location where important documents are protected from being lost, damaged, or accessed by unauthorized individuals. Keeping the BFA secure ensures it is readily available if needed for reference or in the event of a dispute.
Keep a Copy with Your Lawyer
It’s often recommended that your lawyer keeps a copy of the agreement, especially for financial agreements involving de facto couples or specific arrangements under specific circumstances. Lawyers use secure systems to store confidential documents, ensuring they remain protected. This is particularly important if the BFA is ever challenged or needs to be referred to in relation to a court order. Having your lawyer hold a copy provides extra security and ensures easy access to professional advice when needed.
Review the Agreement
Circumstances change, and a BFA that was fair and reasonable at the time of signing may no longer be suitable after significant life changes. To ensure the agreement meets current needs, both parties should be open to future reviews. Significant life events, such as the birth of children, a change in employment, or a new relationship status, can impact financial arrangements. Including a clause that specifies when reviews will occur ensures that both parties agree to revisit the terms as needed. If the parties cannot agree on revisions, the matter may need to be resolved in court to ensure fairness and compliance with the law.
Risks
With a family lawyer on your side, you can get a BFA, but there are risks to consider.
Hidden or manipulated assets
There are many ways to hide or tamper with assets so they can’t be properly valued.
Underreporting income
Individuals can misrepresent income in different ways:
Getting paid in cash.
Overstating business expenses.
Understating business revenue.
Transferring assets
Each party should store their copy of the BFA in a safe place, as it is a crucial document under family law. This could be a safe deposit box, a secure filing system at home, or any location where important documents are protected from being lost, damaged, or accessed by unauthorized individuals. Consulting a binding financial agreement lawyer can provide additional guidance on safeguarding this document to ensure it remains accessible and enforceable if needed.
Cryptocurrency
With the rise of cryptocurrency, there are more opportunities to hide properties. Crypto markets are not well regulated. You can hide wealth in cryptocurrencies that are hard to access.
What can be done?
Tracking down hidden or manipulated assets is a problem. You can hold people accountable for this.
Financial experts
Experts like forensic accountants can help clients identify discrepancies in financial documents and track down assets.
Subpoenas
Working with forensic accountants, your lawyer can subpoena financial documents and require the other party to disclose information.
Coercion, fraud or duress
Both individuals must sign the BFA of their own volition. There are ways this can be breached.
Coercion. Coercion is when one party is psychologically or emotionally manipulated to sign the agreement. This can be through shaming or guilt-tripping.
Fraud. Fraud is when false information is provided, or necessary documents are withheld. This can be hiding assets or manipulating financial information.
Duress. Duress is when one party signs the agreement under threat of physical harm or other endangerment.
What can be done?
There are ways to ensure both individuals are signing the agreement freely.
A cooling off period allows clients to reconsider the agreement and possibly get further advice.
Financial professionals can check the information provided is complete and correct.
A mediator gives clients an equal bargaining position.
Conclusion
Binding Financial Agreements in Australia are a structured way of dealing with financial matters. They provide clarity and security for properties and liabilities. Once you’ve determined the scope of the agreement, you can draft the agreement with your lawyer. Each party should keep a copy of the agreement. Review the agreement if circumstances change.
Thank you, Peter from Andrews Family Lawyers, it was a pleasure dealing with you. A no complication to the point settlement. Your open and honest demeanor helped my ex-partner and I to expediently resolve our financial situation so we can move forward with our lives. Once again thank you.
- Chris Monteiro
Contact us today if you need assistance with preparing a financial agreement.
