Relations and financial matters can get complicated. That’s where Binding Financial Agreements (BFAs) come in. At Pearsons Lawyers, we’ve seen how these agreements can protect financial futures and prevent disputes before they arise. But what exactly is a BFA, and how can it help in family law cases?
Key Takeaways
- Binding Financial Agreements (BFAs) outline how assets will be divided after separation.
- BFAs can be used before (prenup), during, or after a relationship (postnup).
- They can be an alternative to consent orders, especially for avoiding court proceedings.
- Costs vary but are typically higher upfront than verbal agreements—yet they save headaches in the long run.
- BFAs are legally binding but can be challenged under certain conditions, such as fraud or duress.
What Exactly is a Binding Financial Agreement?
A Binding Financial Agreement (BFA) is a legal document between couples, whether married or in a de facto relationship, that sets out how finances, property, and even liabilities will be handled if the relationship breaks down. You might’ve heard of them under different names like ‘prenups’ or ‘postnups’—but in Australia, they all fall under the umbrella of Binding Financial Agreements.
Unlike verbal promises or handshake deals, BFAs are enforceable by law. This means they provide a higher level of security and clarity when dividing assets.
When Can You Make a Binding Financial Agreement?
There’s flexibility in when a Binding Financial Agreement can be created. Here’s a quick look at the options:
- Prenups: A BFA can be signed before a relationship or marriage starts. This often protects wealth accumulated before the relationship, such as a family business, inheritance, or property.
- Postnups: A BFA can also be created after you’re already in a relationship or married. This is useful if financial circumstances change (e.g., one partner starts a business or receives a windfall).
- During separation: If things are already heading south, a BFA can still be drawn up to avoid a long and costly court battle.
How Are BFAs Different From Consent Orders?
BFAs are often compared to Consent Orders—both aim to sort out financial arrangements, but they do it differently. Consent Orders involve the Family Court, while a BFA is a private agreement.
Consent Orders are typically used when both parties agree on property division and want the court to formalise it. BFAs, on the other hand, don’t require court involvement, which means they can be quicker and more discreet.
Pros of BFAs over Consent Orders:
- Avoid court delays and the need for judicial approval.
- Greater flexibility—BFAs can cover almost any financial arrangement.
- Can be drafted before separation.
Cons of BFAs:
- They can be more expensive upfront due to the need for independent legal advice.
- While legally binding, BFAs can be more easily challenged than consent orders.
Child Support Agreements and BFAs
Although BFAs primarily cover financial and property matters, they can also include provisions for child support. However, unlike a Child Support Agreement (CSA), which is lodged with the Department of Human Services, child support provisions in a BFA don’t carry the same automatic legal enforcement. They may act more as a guideline or support for informal arrangements.
So, while you can include child support in a BFA, it’s worth considering whether a separate Child Support Agency assessment would offer more peace of mind.
The Costs of Creating a Binding Financial Agreement
Let’s not sugar-coat it—BFAs are not ‘cheap’. The upfront legal fees can be significantly higher than simply reaching a verbal agreement or making informal arrangements. That said, the security and peace of mind they offer can be quite valuable when things turn sour.
Here’s why BFAs can be costly:
- Each party must get independent legal advice (yes, both need separate lawyers).
- The agreement must be drafted carefully. It is legally binding and will only hold up in court if it is done correctly.
- If challenged, the costs of defending a BFA can be high.
However, many clients find that a BFA is a small price to pay when it comes to safeguarding their assets and avoiding years of litigation.
Pros and Cons of Binding Financial Agreements
To help you decide if a BFA is right for you, here’s a quick list of the pros and cons:
Pros:
- Clear financial roadmap for what happens in a separation.
- Can be tailored to your specific needs, covering assets, debts, and even child support.
- Helps avoid lengthy and costly court battles.
Cons:
- Expensive to create (due to independent legal advice requirements).
- Can be challenged if not drafted properly or if one party was under duress.
- Doesn’t provide the same level of enforcement for child support as a Child Support Agreement.
“A Binding Financial Agreement offers security in uncertain times, but like all good things, it must be handled with care.”
Conclusion: Should You Consider a Binding Financial Agreement?
If you’re looking to protect your assets or set financial boundaries before, during, or after a relationship, a Binding Financial Agreement could be the solution. While they’re not for everyone and do come with their own set of complexities, BFAs offer a clear, legally binding alternative to verbal promises.
At Pearsons Lawyers, we specialise in drafting BFAs tailored to your unique situation. Our experienced team will guide you through the process, ensuring you understand the full implications before signing. While they may not be a fun conversation starter, a Binding Financial Agreement is a practical step for anyone looking to safeguard their financial future.
