Binding Financial Agreements (Prenuptial Agreements)
What is a financial agreement?
A binding financial agreement (BFA) is a legally binding document setting out an agreement in relation to financial matters between a married or de facto couple (including a same sex couple). The document can set out the parties’ agreement for property settlement or spousal maintenance.
BFA’s can be entered into
- before a marriage or de facto relationship commences;
- during a marriage or de facto relationship before or after the parties separate; or
- after the parties divorce.
When is a BFA binding?
- a BFA is signed by all parties;
- before signing the agreement, each party is provided with independent legal advice about:
(a) the effect of the agreement on the rights of that party; and
(b) the advantages and disadvantages, at the time that the advice was provided, to that party of making the agreement;
- either before or after signing the agreement, each party is provided with a signed statement by the legal practitioner stating that the advice referred to in paragraph 2 was provided to that party;
- a copy of the statement referred to in paragraph 3 is given to the other party or to a legal practitioner for the other party; and
- the agreement has not been terminated or set aside by a court.
Advantages and disadvantages
The advantages and disadvantages of entering into a BFA will vary on a case by case basis. Subject to the circumstances of each individual case, the advantages and disadvantages may include the following
- Parties can “contract out” of the property settlement and spousal maintenance provisions of the Family Court Act 1997 (WA) and Family Law Act 1975 (Cth).
- Parties are eligible for stamp duty reductions on any transfers of real estate between them.
- Parties avoid costly and time consuming Family Court proceedings.
- Provides certainty as to what your property settlement and spousal maintenance rights will be in the event your relationship ends.
- Parties may exclude from a property settlement assets accumulated before a relationship commenced.
- Entering into an agreement that may be more advantageous to the outcome you could expect if you were involved in Court proceedings.
- Each party is required to obtain specific and independent legal advice in relation to the BFA.
- There a broad number of grounds under which a BFA may be set aside.
- There is no guarantee the legal advice received by the other party to the agreement will ensure the agreement is binding.
- BFA’s cannot be registered at the Family Court.
- There is no way to predict the future. Therefore while an agreement may seem advantageous at the time of signing, there is no way of knowing its position in relation to your future circumstances.
- A BFA removes the freedom to negotiate a settlement at the time separation occurs.
Parties are required to provide full disclosure of their financial position prior to entering into the agreement. Non disclosure or inadequate disclosure will increase the risk of the agreement being set aside by the Family Court if one party challenges it.
BFA’s are often used in situations where one party is in a superior financial position having greater assets or a greater income which they want to protect.
Given the strict requirements for BFA’s to be binding, BFA’s should be drafted carefully by an experienced family lawyer.
Carr and Co accepts instructions to prepare or advise on BFA’s.
IIf you require assistance with the preparation of, or advice in relation to an already prepared BFA, contact one of the experienced family lawyers at Carr & Co on (08) 9322 8000 or firstname.lastname@example.org.