Binding financial agreements (BFAs) and consent orders are the two primary ways of dividing assets through a legally binding agreement. These options have key differences that make them suitable for different cases. Let’s look at which will benefit your unique circumstances.
Key takeaways
Consent orders are granted by the family court after the parties have satisfied a four-step test.
Complex property pools benefit from the flexibility of binding financial agreements.
Financial agreements enable parties to settle property matters during or before a relationship.
Consent orders offer a more cost-effective option for couples with smaller property pools.
What are they?
Binding financial agreements vs. consent orders
Binding financial agreements and consent orders are governed by the Family Law Act. They’re enforced by the Federal Circuit and Family Court. They cover liabilities and property acquired during or before a marriage in property settlement, as well as spousal maintenance. Their enforceability makes them more effective than informal agreements. They can carry serious consequences if a party fails to honour the terms in spousal maintenance. Here are their essential element
Binding financial agreement
A binding financial agreement (BFA) is a private contract between parties that doesn’t require court approval. They must satisfy the following legal requirements to be binding:
Both parties make a full and frank disclosure of their financial circumstances.
Each of the parties involved must obtain independent legal advice to explain the effect of the binding financial agreement on their interests.
Both parties involved sign the binding financial agreement once they approve the terms.
The lawyers provide each party with a Certificate of Independent Legal Advice. This proves that the clients have completed the required pre-action procedures.
Consent orders
A consent order can formalise financial arrangements and parenting matters. The consent order process requires parties to require court approval before proposed consent orders will be accepted.
Parties must disclose their financial resources to ensure the court’s involvement can ensure a fair division of assets.
The binding financial agreement is assessed according to a four-step process. Be ensure to obtain independent legal advice, which includes
Valuing the asset pool after a complete financial disclosure.
Considering each other’s party’s financial and non-financial contributions to the marriage.
Determining the future financial resources of the parties.
Finally, the court reviews the proposed order’s fairness and equitability of financial matters.
Which one should you use?
There’s no one-size-fits-all solution that is ideal for every situation. The value of a financial agreement versus a consent order depends on the individual circumstances of your financial matters. Let’s consider some different scenarios and which option can help understand what consent orders are for in the Family Law Act.
A large and complex property pool
Some property divisions involve significant assets and complex financial arrangements. In these situations, the parties would benefit from having maximum flexibility in how the division is handled. In this case, a binding financial agreement could be more useful.
Since financial agreements don’t involve the court, the parties can decide between themselves what binding financial agreement they’re prepared to agree to. Consent orders are assessed through a predefined test that’s out of the parties’ control. The fact that the parties are required to seek independent legal advice makes it easier to deal with complicated finances in consent orders. It’s crucial to find a lawyer who has extensive experience with financial agreements.
Recommendation: BFA
Time-dependent settlements
There’s a deadline for settling financial or property matters after a divorce. Married couples can seek a consent order at any time after separation. Once they’ve divorced, they have one year to arrange a property settlement in a consent order. If you’re leaving a de facto relationship, you have two years after separation to settle your finances. What if you want to form a legally binding financial agreement before separation in a consent order? This is another benefit of financial agreements.
A binding financial agreement can be entered into before, during, or after a de facto relationship. This is helpful; seek legal advice if a couple wants to clarify financial circumstances and expectations within a relationship.
Recommendation: BFA
Financial agreement peace of mind
Clients want certainty that once their property matters are finalised, they can move on without fear that their agreement will fall through. This favours consent orders. The Family Law Act regarding financial agreements is very complex. While BFAs are legally binding, they’re typically easier for the other party to challenge after the fact through a court hearing. A consent order gives you greater peace of mind because the court order has already ruled that the financial agreement is valid. There are only limited circumstances when future claims will be successful.
Recommendation: Consent orders
A cost-effective solution
BFAs generally have higher legal fees. Clients with large asset pools may be willing to pay a premium to maintain complete control over their finances after a separation. This makes a BFA more viable. However, clients with more modest finances won’t want to pay thousands of dollars for property settlement. Property and financial matters when there’s a more affordable option. Consent orders are typically quicker and more cost-effective.
Recommendation: Consent orders
From our clients
Peter and Lisa are outstanding. They helped me navigate an extremely difficult personal and legal situation. They treated me with kindness and respect. Peter provided practical, no nonsense independent legal advice to achieve outcomes that are in the best interests of my kids.
- Jennifer Eden
Regardless of what approach you choose to take, it’s important to provide assistance. While it isn’t mandatory to receive independent legal advice when obtaining consent orders, a family lawyer will ensure your application is accepted without delays. Our experienced team can help you work through a complicated financial relationship with your ex-partner successfully.
Conclusion
Finances can be settled through a private agreement or court orders. These options have key differences that benefit different cases. A BFA offers flexibility in parenting matters, spousal maintenance, and financial orders. Consent orders provide more certainty through the Family Law Act and court involvement. Consider your circumstances carefully before deciding which option provides the most comprehensive solution.
If you’re looking to make a formal agreement, seek legal advice to understand the key differences of consent orders and BFAs. Our firm can help protect your financial interests, especially in Family Law Act. Contact us today for assistance with your family law matter.
