When it comes to planning for the future, especially in relationships, clarity and certainty are key. In Australia, Binding Financial Agreements (BFAs) serve as an important legal tool that allows couples to set out how property, financial resources, and spousal maintenance will be dealt with in the event of a relationship breakdown. BFAs are governed by the Family Law Act 1975 (Cth) and apply to both married and de facto couples, including same-sex couples.
This article outlines the different types of BFAs, when they can be made, and why they can be a prudent choice for couples at various stages of their relationship.
What Is a Binding Financial Agreement?
A Binding Financial Agreement is a private contract made between parties to a marriage or a de facto relationship. Provided it meets strict legal requirements, it allows couples to avoid court proceedings by agreeing in advance on how finances will be managed in the event of separation.
To be legally enforceable, a BFA must:
Be in writing and signed by both parties;
Include a statement from each party’s legal practitioner confirming that independent legal advice was provided;
Clearly identify the relevant section of the Family Law Act under which the agreement is made.
Types of Binding Financial Agreements
Under the Family Law Act 1975, different BFAs can be entered into at various stages of a relationship. The relevant sections of the Act differ depending on whether the parties are married or in a de facto relationship.
Before a Marriage or De Facto Relationship (Pre-Nuptial Agreements)
Married couples: Section 90B
De facto couples: Section 90UB
These agreements are commonly referred to as "pre-nups." They set out how property and finances will be divided if the relationship ends. This can provide peace of mind, especially where one party has significantly more assets or children from a previous relationship.
During a Marriage or De Facto Relationship
Married couples: Section 90C
De facto couples: Section 90UC
Couples may choose to enter into a BFA while they are together, often as a proactive step to clarify financial arrangements or update a previous agreement due to changes in circumstances, such as the birth of a child or acquisition of significant assets.
After a Marriage or De Facto Relationship Breaks Down
Married couples: Section 90D
De facto couples: Section 90UD
These agreements are used to formalise a financial settlement after separation or divorce. They offer an alternative to court orders and can be tailored to the unique circumstances of the parties involved. Importantly, entering into a BFA after separation can help reduce conflict and legal costs.
Key Considerations
While BFAs provide flexibility and privacy, they must be entered into with caution. Common issues that can lead to a BFA being challenged include:
Lack of independent legal advice;
Undue influence or duress;
Unfairness or non-disclosure of assets;
Major changes in circumstances (such as the birth of children or a significant illness).
Because of these risks, it is essential to obtain advice from a qualified lawyer in Australia before entering into a BFA.
Conclusion
Binding Financial Agreements under the Family Law Act 1975 offer couples in Australia a powerful way to manage their financial affairs and protect their interests at various stages of their relationship. Whether entered into before, during, or after a relationship, a properly drafted BFA can save time, stress, and uncertainty in the future.
If you're considering a BFA or want to understand how one might apply to your situation, contact our office today for tailored legal advice.