A Guide to “Prenups” – Understanding Binding Financial Agreements in Australia

KEY TAKE OUTS:

• Understand what a Binding Financial Agreement or “prenuptual agreement” or “prenup” is in the Australian setting
• Understand the legal consequences of a Binding Financial Agreement
• FAQ’s on Binding Financial Agreements

 

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In Australia, Binding Financial Agreements (BFAs), more commonly known as “prenuptial agreements” or “prenups,” offer couples a proactive way to manage their financial affairs before, during, or after a relationship or marriage. This comprehensive guide sheds light on BFAs, providing essential insights into how they work, their benefits, and key considerations, all tailored to the legal landscape of Australia.

What Is a Binding Financial Agreement?

A BFA is a binding agreement between parties which outlines how assets, liabilities, and financial resources will be allocated should their relationship end. A BFA is an alternate to Consent Orders or the Court process.

Legal Framework

The Family Law Act 1975 (Cth) sets the foundation for BFAs, allowing couples significant autonomy in determining their financial future without court involvement. For a BFA to be legally binding, it must meet specific criteria, such as:
a. Providing full and frank financial disclosure;
b. Ensuring both parties receive independent legal advice;
c. Ensuring the BFA deals only with property, financial resources or spousal maintenance;
d. Ensuring the BFA is in writing and specifies which section it is made under the Family Law Act; and
e. The BFA must be signed by all parties.

Types of Binding Financial Agreements

BFAs can be entered into before marriage, during marriage or after divorce under sections 90B, 90C and 90D of the Family Law Act.

BFAs can also be entered into by parties who are in a de facto relationship and can entered into before, during or after separation of the de facto relationship under sections 90UB, 90UC and 90UD of the Family Law Act.

 

Legal Consequences of a Binding Financial Agreement

Once both parties sign the BFA, it becomes legally binding which means that both parties must comply with the terms of the agreement.

Both parties should be aware of the legal consequences if they enter into a BFA. In most cases if a parties enter into a BFA, it will mean they waive their right to make an application to the Court to deal with property dispute in the event they separate.

 

Ways to End or Void a Binding Financial Agreement

A BFA can come to an end in several different ways which include:

• Entering into a termination agreement;
• Entering into a subsequent BFA which includes provisions to end the original agreement; or
• Having a clause which makes the agreement condition upon an event.

A BFA can also be set aside or found to be void for several reasons. In order to set aside a BFA, an application must be made to the Court which shows evidence of any of the following:

• The agreement was obtained by fraud.
• There are circumstances that have arisen since the agreement was entered into that make it impracticable for the agreement or part of the agreement to be carried out.
• There has been a significant change in circumstances that will mean that a child will suffer hardship if the agreement is not set aside.
• That when entering into the agreement, one party entered into conduct that was unconscionable.

Binding Financial Agreement FAQs

Is a Binding Financial Agreement the Same as a ‘Prenup’?
In Australia, what is commonly referred to internationally as a “prenup” is known legally as a Binding Financial Agreement. Both terms refer to agreements made before marriage (or cohabitation) that outline how assets and finances will be divided upon separation.

Can a Binding Financial Agreement Be Modified or Cancelled?
Yes, with mutual consent and following the same legal protocols as the original agreement, including independent legal advice.

Are Binding Financial Agreements Only for the Wealthy?
No, they serve anyone seeking financial clarity and protection in a relationship, regardless of wealth level.

Duration of a Binding Financial Agreement?
It remains valid until legally terminated or replaced by a new agreement.

What Happens if We Don’t Follow the Binding Financial Agreement?
If one party breaches the BFA, the other party can seek enforcement through the court. The court may order compliance with the agreement or provide remedies such as financial compensation.

Can a Binding Financial Agreement Cover Future Assets or Inheritances?
Yes, a BFA can include provisions for future assets or inheritances, detailing how they would be treated in the event of a separation. This foresight can protect future financial gains or gifts.

How Quickly Can a Binding Financial Agreements Be Finalised?
The timeframe for finalising a BFA depends on several factors, including the complexity of your financial situation, how quickly both parties can reach an agreement, and the thoroughness of independent legal advice. Typically, it could take several weeks to a few months.

Does a Binding Financial Agreements Need to Be Filed with a Court?
No, a BFA does not need to be filed with a court to be effective. However, it must meet all legal requirements for BFAs under the Family Law Act, including independent legal advice for both parties.

Can We Include Child Support Agreements in a Binding Financial Agreement?
While a BFA can mention child support, any terms regarding child support must not contravene the Child Support (Assessment) Act. It’s important to seek legal advice as child support arrangements might need to be handled separately to ensure they are in the children’s best interests and comply with legal requirements.

 

Binding Financial Agreement FAQs

Binding Financial Agreements assist those looking to manage their financial matters with foresight and security or for couples who have now separated and wish to divide the property pool. However, the complexity of these agreements requires professional legal advice to ensure they are fair, comprehensive, and binding.

Coutts Lawyers specialises in family law, including BFAs, offering the expertise to navigate these agreements’ intricacies. Protect your financial future by consulting with our team, ensuring your BFA is crafted with precision and care.

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