Binding Financial Agreements (or BFA’s) are intended to provide married and de facto couples with the power to avoid Court and divide their assets as they deem fit.
A BFA is a written document, prepared by lawyers, which regulates the financial matters between married or de facto couples. If both parties agree to the terms of the BFA, and it is drafted and signed off properly, it has the power to override the jurisdiction of the Family Court.
The most commonly known form of BFA is a ‘Pre-Nuptial Agreement’ which provides soon to be married couples with the ability to determine how their assets and liabilities will be divided in the event that they separate. However, there are a wide range of other BFA’s available which provide financial protection for the periods before, during and after a relationship.
In addition to BFA’s determining how assets and liabilities will be divided in the event of separation, they can also be used to formalise a property settlement that has been agreed between couples who have already separated. BFA’s are used to finalise these property settlements in circumstances where the parties wish to avoid the scrutiny of the Family Court and not be bound by legislative restrictions.
Under the traditional method of finalising a property settlement, separated couples are required to provide full financial disclosure to the other party and the Court prior to a settlement becoming final. They are also required to divide their assets within certain parameters set by the Family Law Act and governed by the Family Court, and significantly, the Court must be satisfied the proposed settlement is just and equitable in all the circumstances.
In contrast, BFA’s do not require the parties to disclose anything to the Court, or the other party for that matter. Also, as BFA’s are agreements made ‘out of Court’, there is no requirement that the terms of the agreement fall within the range of outcomes that the Family Law Act and the Family Court deem suitable.
One of the other major benefits of BFA’s is their ability (in specific cases) to eliminate a spousal maintenance claim for all time, something that cannot be completely achieved under the traditional Court Order settlement process. Spousal maintenance claims exist in separated couples where one party has a significantly higher income earning capacity than the other, and the other party can demonstrate that they canno support themselves and have a need for additional ongoing financial support.
It is a requirement that both parties receive independent legal advice prior to signing the BFA, and that their lawyer signs a certificate. It is important that both parties are fully informed of their rights and entitlements prior to entering into a BFA as it extinguishes their ability to make a further financial claim in the future.
It is also very important that BFA’s are correctly drafted by experienced lawyers so as to avoid the possibility of one party seeking to overturn the agreement in the future, on the basis of a technicality.
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