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What is a Binding Financial Agreement?

Oct 31, 2013

Also known as a Pre-nup or Pre-nuptial agreement. A Binding Financial Agreement  is a written agreement entered into between a married or de facto couple that specifies how, in the event of the breakdown of the relationship, all or any of the property or financial resources of either or both the parties is to be divided.

A "Pre-nuptial Agreement" or "Pre-nup", can be entered into before the relationship or marriage, during the relationship or marriage, or after separation.

Many couples enter into a Binding Financial Agreement after they have separated to legally bind the terms of the property settlement agreement that they have reached.

Provided that the legislative requirements as prescribed by the Family Law Act have been fully complied with, subject to certain exceptions, the parties of a Binding Financial Agreement are prevented from making an application to the Court for property settlement Orders that specifically relate to property previously dealt with in the Binding Financial Agreement.

At Davoren Associates, we can help you determine whether or not a Binding Financial Agreement is in your interest and how it will affect you!

Advantages of Binding Financial Agreements:

The most advantageous part of Binding Financial Agreements is the certainty they create with respect to how your assets and liabilities are dealt with in the event you separate.

With the existence of a Binding Financial Agreement, no dispute can arise about how assets of the relationship are to be divided upon separation. Property settlement disputes are typically expensive, stressful and time-consuming.

A Binding Financial Agreement can cover all of the property of the parties or just deal with specific assets. In this respect, a Binding Financial Agreement can protect assets owned prior to the commencement of the relationship or any inheritances or gifts one party received during the relationship. Without a Binding Financial Agreement assets like these must be included in the property pool for division between the parties.

A Binding Financial Agreement allows you to keep assets you owned before the relationship, including a Trust Fund or any superannuation entitlements. Similarly, you are able to exclude assets that you wish to leave to your children or other family members.

In the appropriate circumstances, a Binding Financial Agreement can also be used to prevent future spousal maintenance applications and you can limit the amount of support you may have to provide your partner following separation.

Requirements of a Binding Financial Agreement:

A Binding Financial Agreement must strictly comply with the legislative requirements as set out in the Family Law Act, namely section 90G in the case of married couples and section 90UJ in the case of de facto couples.

To be legally binding, the following must be complied with:

  • The Agreement must be in writing and signed by the parties;
  • Prior to signing the Agreement, each party must be provided with independent legal advice from a legal practitioner as to the effect of the Agreement on the rights of that party and about the advantages and disadvantages of entering into the Agreement;
  • Each party is provided with a signed statement from their legal practitioner stating that they gave advice to that party and a copy of that statement was given to the other party or to the other party's legal practitioner; and
  • That the Agreement has not be set aside by the Court or terminated by the parties as explained below:

A Court can set aside a Binding Financial Agreement in the following circumstances:

  • Where the Agreement has been obtained by fraudulent means, including by failure to disclose an asset;
  • The Agreement was entered into for the purpose of defrauding or defeating a creditor;
  • The Agreement is void or unenforceable. For example, if it does not comply with the legislative requirements;
  • A change in circumstances has arisen since the Agreement was drafted making it impractical or impossible to carry out;
  • A change in circumstances has arisen with respect to the care, welfare or development of a child;
  • If a party's conduct in making the Agreement was, in all circumstances, unconscionable; or
  • A "payment flag" is operating on a superannuation interest covered in the Agreement that cannot be lifted or that the Agreement deals with an "unsplittable" superannuation interest.

To terminate a Binding Financial Agreement, the parties must either enter into another Binding Financial Agreement which includes a clause stating the former agreement is terminated, or the parties must enter into a "Termination Agreement" of which they are also to sign and receive independent legal advice prior to entering into this type of agreement.

The legislative requirements of Binding Financial Agreements have been interpreted very strictly by the Court, as by entering into them, parties have effectively “opted-out” of the provisions contained in Section 79 of the Family Law Act dealing with whether an agreement is just, fair and equitable. Therefore, a Court is not able to set aside an Agreement just because it is unfair or inequitable to one party.

It is also important to note that a Binding Financial Agreement continues despite the death of a party to the agreement. In this circumstance, the Binding Financial Agreement becomes binding upon the legal personal representative of the deceased party.

Contact Us

There is no “one-size-fits-all” Binding Financial Agreement. At Davoren Associates, we are able to understand what you hope to achieve by entering into such an Agreement and will tailor the Binding Financial Agreement to fit your particular needs and circumstances.

We aim to make the process as simple and stress-free as possible whilst ensuring you have received comprehensive legal advice specific to your individual Family Law property settlement and financial matters.

If you would like further information or wish to schedule an initial consultation, please do not hesitate to contact us on (07) 5575 2844.