Talking to a new or existing partner about your financial affairs and what would happen if you were to separate may not feel like a positive conversation, but it can save you both many headaches and money in the future. By sitting down and agreeing who should have what if you were to separate when you’re entering, in the middle of or even navigating the end of a relationship can help avoid expensive disputes if you were to say your goodbyes.
One way to achieve this is through a Binding Financial Agreement (BFA). A BFA is a private contract between two people, formalising how their assets and liabilities will be divided if they separate or have separated.
But is a BFA right for your relationship? This article looks at the benefits of a BFA, as well as answers some of the most frequently asked questions we receive about this type of contract.
Advantages of a Binding Financial Agreement (BFA) When You’re In a Relationship
- You can enter a BFA at any time.
A BFA can be made at any point of a relationship, including before, during or after separation or divorce. It will give you and your partner assurance of what would happen to any property or financial assets if you were to part ways, helping you to avoid court and disputes.
As a BFA is a complex legal contract, both you and your partner will need to seek legal counsel prior to entering a BFA. This is where our team of family lawyers at Arbon Legal Group can help you or your partner in finding terms you are comfortable with.
- BFAs provide certainty and security.
Look at a BFA like getting home insurance. No one wants to use the insurance, but if something were to happen to your house, like a fire or flood, your insurance is there as a safety net.
BFAs provide certainty of how you and your partner’s assets and liabilities will be distributed, helping avoid unnecessary arguments if the relationship breaks down. This can especially ease stress if you end your relationship not on the best of terms, creating one less thing to worry about.
- A BFA is cost-effective.
BFAs avoid family law proceedings through the court system, which can be drawn out and costly, depending on each party’s willingness to compromise. So, a BFA saves you the cost of these proceedings as everything is already determined.
Every BFA is unique to the relationship and can detail everything from larger investments and debts, to individual assets and future inheritance. Once the details of the BFA are established, the cost of a BFA can usually be completed for a fixed fee.
- BFA’s are efficient.
Family law courts in Australia are inundated with matters, many waiting months or even years to be heard and concluded. If you’re waiting on your turn to decide on division of finances or assets, this can mean not being able to move on until everything is decided.
- BFA’s provide flexibility in how assets and liabilities are to be divided.
A BFA can be particularly beneficial if the BFA is entered into to protect one party’s interests significantly more than the other. This is common when one party enters a relationship with a more extensive asset portfolio than the other, or alternatively, if the parties agree to apportion more to one party than the other at the end of the relationship.
Frequently Asked Questions
When can you make a BFA?
A BFA can be made:
– Before entering into a relationship (commonly known as a pre-nup).
– During a relationship.
– After separating, but before divorcing.
– After a divorce.
So, in short, a BFA can be made anytime.
Are BFA’s binding on courts?
Yes, a BFA is binding on courts, however, to be binding, the BFA must comply with specifications under the Family Law Act. If the requirements are not met, the BFA can be set aside or be void. This is why BFAs must be carefully drafted and properly executed to avoid the risk of being set aside.
It’s important to note that both parties need to obtain independent legal advice, and both be provided with a signed statement by their lawyer confirming that the advice was given. These signed statements need to be exchanged between the parties.
What can a BFA cover?
BFAs can specify how parties have agreed to divide assets and liabilities, and may cover:
– A financial settlement that includes superannuation entitlements.
– Spousal maintenance for a specific timeframe.
– Agreement for a delayed financial settlement.
– Agreement for an ongoing business relationship until an agreed time.
– Protection of existing assets or inheritances.
– Provision for children of previous relationships to inherit.
– Preservation of family farms or businesses for future generations.
Who can create a BFA?
BFAs are complex contracts and require specialised family law advice. Significant expertise is required by the lawyer to satisfy their duty under the Family Law Act to ensure the BFA is binding. Each BFA must be highly tailored to the individual parties involved and strategic advice is required by the lawyer drafting and/or advising on the document.
At Arbon Legal Group, we are experienced in drafting and advising on all aspects of BFA’s. The importance of getting a BFA right the right time cannot be stressed enough.
If you are thinking you may benefit from a BFA, contact our team at Arbon Legal Group for a consultation.