What is a Binding Financial Agreement?
Also commonly, but incorrectly, referred to as pre-nuptial agreements, Binding Financial Agreements allow you and your partner to agree, at a time when your relationship is not under stress, how your assets and liabilities are to be distributed in the event of a later separation.
Spousal Maintenance can also be addressed in a Binding Financial Agreement, as well provision for how you intend to manage your financial affairs during the course of the relationship. For more information on Spousal Maintenance please see our article titled ‘Am I entitled to Spousal Maintenance?’
Contrary to popular belief that a Binding Financial Agreement must be executed prior to marriage, Binding Financial Agreements can be entered into at any time. They can also be entered into by de facto and same sex couples.
Although a Binding Financial Agreements can be entered into at any point in a relationship we always recommend preparing one as early as possible. Executing the Binding Financial Agreement at the start of the relationship or cohabitation usually results in a more fair and amicable agreement being reached. This avoids disputes and potential costs later down the track.
What are the benefits of entering into a Binding Financial Agreement?
You should consider entering into a Binding Financial Agreement if any of the following are relevant to your relationship:
- There is a significant income earning disparity between your partner and yourself.
- Either of you have significantly more assets, property, financial resources, foreign assets, liabilities, superannuation etc than the other at the commencement of the relationship.
- One party is expecting a significant inheritance, personal injury payment, or other windfall.
- You want the opportunity to predetermine the distribution of your assets and liabilities in the event of separation early in the relationship.
- You wish to avoid the risk of lengthy and expensive litigation in the event of separation.
- You have or intend to have children and want to ensure they are financially supported it the event of separation.
- You have complex family structures such as family trusts or businesses you wish to protect and preserve.
- Either of you have children from earlier relationships you want to ensure are financially protected in the event of separation.
- Either of you are seriously ill and want to ensure provision is made for your spouse or children.
What else should I know about Binding Financial Agreements?
Both you and your partner are required to seek independent legal advice on the terms of the Binding Financial Agreement. It is not possible to prepare a Binding Financial Agreement yourself as there are strict requirements to be met under the Family Law Act to ensure it is binding and enforceable.
There are a number of circumstances in which a Court might set aside a Binding Financial Agreement which include:
- There was a failure by a party to disclose a material matter, i.e. fraud.
- The agreement has been prepared for the purpose of defeating a creditor of a party.
- The agreement is void, voidable, or unenforceable because of some aspect of its creation or the actions of one of the parties or their legal representatives.
- In the circumstances that have arisen since the agreement was made it is impracticable for the agreement or a part of the agreement to be carried out.
- There has been a material change in circumstances after the agreement was entered into relating to the care of a child of the relationship and the child or a party of the relationship will suffer hardship.
- Unconscionable conduct.
It is important to seek legal advice as soon as you consider entering into a Binding Financial Agreement with your partner. This ensures a binding and enforceable agreement is prepared which safe guards your assets, protects your family, and secures your future.
Contact us for further information on whether a Binding Financial Agreement is appropriate in your circumstances.