Managing Binding Financial Agreement after Separation: A Full Overview

Many couples in Australia actively opt for binding financial agreements after separation to mitigate the potential risks and uncertainties linked to dividing assets and financial responsibilities. Separation poses challenges and emotional strain, significantly impacting both personal lives and financial situations.

What is a Binding Financial Agreement

A ‘binding financial agreement,’ or ‘financial agreement,’ binds financial arrangements in case of a marriage or de facto relationship breakdown.

Binding financial agreements, or BFAs, go by a variety of names. These include:

• Pre-nuptial Agreements (commonly known as prenups),
• Post-nuptial Agreements (post-nups); and
• Cohabitation Agreements.

The courts have named them Binding Financial Agreements.

Types of Binding Financial Agreements

There exist three primary types of Binding Financial Agreement:

1. Pre-nuptial Agreements, made before marriage and in anticipation of it;
2. Cohabitation Agreements are established when parties are already living together as a married or de facto couple and
3. Postnuptial Agreements are arranged after marriage, regardless of intentions to remain married, separate, or divorce.

The BFA type selection depends on your and your partner’s unique circumstances.

Financial Agreement in Family Law

The Family Law Act 1975 (Cth) (“the Act”) allows parties to document a Financial Agreement before, during, or after a wed or de facto relationship. Sections 90B, 90C, and 90D are pertinent provisions for married or divorced couples. In contrast, for de facto couples, they are Sections 90UB, 90UC, and 90UD. (Note: De facto couples in Western Australia are governed by specific legislation in Western Australia.)

A Financial Agreement must also expressly state that it is made under the relevant provision of the Act, specifying the parties’ particular relationship status.

The Importance of a Binding Financial Agreement

A binding financial agreement, also termed a legal separation agreement, financial separation agreement, or simply separation agreement, is a lawfully binding contract between two parties who have separated or are considering separation. It provides transparency and assurance in allocating assets, liabilities, financial resources, and methods for spousal maintenance and support for children. By signing a binding financial agreement, both sides may stop lengthy and expensive court proceedings. This separation contract lets individuals manage their economic opportunities, providing security and tranquillity.

Strict requirements govern the validity of a binding financial agreement. These requirements include:

• The agreement needs to be in the written word.
• Both you and your partner must sign the agreement.
• You and your spouse must each obtain distinct legal advice from an Australian lawyer before signing the agreement. The advantages and disadvantages of signing a deal and how it affects each party’s legal rights should be dealt with in this advice.
• A signed declaration attesting that you and your spouse both received sufficient legal advice to sign the agreement must be obtained from each of your specific attorneys.
• Your spouse or lawyer must receive a copy of the agreed-upon declaration of legal advice that you received.
• You or your attorney must receive a copy of the agreed-upon statement of legal advice that your spouse has received.

How to Draft a Binding Financial Agreement

Carefully assess and pay attention to detail when drafting a binding financial agreement. It’s highly advisable to enlist the service of a skilled family lawyer specializing in family law and binding financial agreements. The lawyer will lead you through the process, confirming you meet all legal needs and accurately defining your intentions in the agreement. When drafting, deliver full and honest disclosure of all pertinent financial details. Make the deal clear, detailed, and complete, covering all facets of asset division, liabilities, and financial resources. Both parties should accept independent legal advice and have time to check the agreement’s terms before signing.

Seeking Legal Advice for Binding Financial Agreements

Seeking legal guidance is vital when dealing with binding financial agreements. A qualified family lawyer can provide necessary guidance and support throughout the process, explaining legal requirements, helping understand rights and duties, and ensuring fairness and reasonableness in the agreement. A lawyer will also confirm that the contract is drafted correctly, considering all relevant factors and potential future scenarios, providing confidence in its enforceability, and defending interests in the long run.

Common Mistakes to Avoid in Binding Financial Agreements

When entering a binding financial agreement, it’s crucial to avoid common mistakes that could render it invalid or unenforceable. One such mistake is ignoring the need to obtain independent legal advice. Both parties must consult separate lawyers specializing in family law to safeguard their rights and interests. Another error is failing to provide complete financial disclosure. It’s vital to disclose all assets, liabilities, and economic resources, as failure could result in the court setting aside the agreement. Additionally, hastily agreeing without fully grasping its implications or proper drafting can lead to future problems. Therefore, it is paramount to take the time to learn the agreement, seek legal counsel, and ensure its accurate reflection of intentions.

Alternatives to Binding Financial Agreements

While many couples prefer binding financial agreements after separation, they may only be suitable for some. Alternative options are available that better fit your circumstances. One option is arranging a property settlement through mediation or collaborative law. This technique allows both parties to collaborate with professionals’ help to reach a mutually acceptable agreement. Another option is applying for consent orders from the Court. Consent orders are legally binding and offer certainty and finality about asset division and financial matters. Searching for legal advice is essential to determine the most suitable option.

Conclusion

Dealing with binding financial agreements after separation can seem complex, but having the proper knowledge and guidance empowers you to protect your financial interests and achieve a fair division of assets. Comprehending the importance of binding financial agreements, being aware of the critical components, and seeking legal advice enable you to handle this process confidently. Avoid common mistakes, consider alternatives, and prioritize your long-term financial well-being. If you require assistance with binding financial agreements or any other family law matters, contact Family Lawyers Mackay today for expert advice and support.

FAQs

What occurs when my relationship ends without a BFA?

Suppose your relationship ends without a legal BFA. In that case, you and your former partner/spouse must negotiate a property settlement or apply to the Family Court for a determination.

What does a consent order mean?

Consenting orders document the parenting arrangements or property distribution with a former partner after a marriage or relationship ends. Unlike Binding Financial Agreements (BFAs), these orders are typically submitted to the Court for approval.