What is a binding financial agreement?

A Binding Financial Agreement (BFA) is a legal document that outlines the financial arrangements between parties in the event of a separation or divorce. It is a private agreement between two parties (usually spouses or de facto partners) that sets out how their property, assets, and liabilities will be divided in the event of a breakdown in their relationship.

A BFA can cover various financial matters, such as property, superannuation, spousal maintenance, and other financial resources. It can be entered into before, during or after a marriage or de facto relationship.

A BFA will only be enforceable and binding if it meets certain requirements such as:

It must be in writing and signed by all parties.
Each party must have received independent legal advice before signing the agreement.
The legal advice must include an explanation of the effect of the agreement on the rights of the party, and the advantages and disadvantages of entering into the agreement.
Each party’s lawyer must provide a signed statement that they provided the necessary advice and explained the effect of the agreement on their client’s rights.
The agreement must not be entered into under duress or undue influence.
The agreement must specify that it is intended to be a binding financial agreement under the Family Law Act 1975.
It is essential to seek legal advice before entering into a BFA, as failure to meet any of these requirements may render the agreement invalid or unenforceable.

The law about binding financial agreements is very complex. By entering into a binding financial agreement, you are choosing to set your own terms and conditions for how your assets, debts and financial matters will be handles without relying on the court to make those decisions for you.

Important Considerations:

While entering a BFA offers numerous advantages, it also comes with responsibilities and complexities.

Legal Advice:

Both parties must seek independent legal advice before signing the BFA to ensure it is fair and reasonable. Failure to do so could lead to the court setting the BFA aside.

Full Disclosure

Complete and honest financial disclosure is essential. Failure to do so can lead to the agreement being set aside by the court.

Enforceability

A poorly drafted or unfair agreement may not withstand legal scrutiny. Ensuring your BFA is legally enforceable is crucial.

Changing a BFA

If both parties want to change the agreement, you can do so by creating a new agreement or an addendum that reflects the updated terms. The new agreement needs to comply with the legal requirements and requires legal advice from independent solicitors for each party. Once both parties sign the new agreement, it replaces the previous BFA.

Court Intervention

If you believe the current BFA is unfair, unreasonable or has been entered into under duress you should seek urgent legal advice as you may be able to seek the court’s intervention in the following ways:

By filing an application with the court which outlines why you believe the BFA should be set aside.
The court will need to review the agreement and take into consideration factors such as whether both parties received independent legal advice before signing, whether there was full financial disclosure and whether the agreement is just and equitable.
If the court believes the BFA is valid and fair, it may uphold the agreement. If the court finds the BFA is unjust or invalid, the court may set it aside and make financial orders in accordance with family law principles.

If you intend on entering a BFA, it is essential that you seek legal advice to ensure your BFA is valid and equitable for both parties.