Understanding Binding Financial Agreements in Australia What is a Binding Financial Agreement? 

A Binding Financial Agreement (BFA) is a legal contract between two partners, either married or in a de facto relationship, which outlines how their assets, finances, and debts will be divided if their relationship ends. BFAs can be established before, during, or after a relationship. 

Why Consider a BFA? 

BFAs offer a way for couples to safeguard their financial futures and agree on what will happen to their assets should their relationship come to an end. This can help avoid the cost and stress of going to court if they decide to break up. 

Legal Requirements for a BFA 

To be legally binding, a BFA must meet certain technical requirements set out in the Family Law Act 1975. These include: 

• The agreement must be in writing and signed by both parties.
• Each party must receive independent legal advice about their rights and the advantages and disadvantages of making the agreement.
• A certificate from each legal advisor must be annexed to the agreement, certifying that the advice was given.

When Can You Enter into a BFA? You can enter into a BFA: 

• Before the marriage (section 90B) or de facto relationship (section 90UB)
• During the marriage (section 90C) or de facto relationship (section 90UC)
• After the marriage (section 90D) or de facto relationship (section 90UD)

Can the Court Set Aside a BFA? 

Yes, the court has the power to set aside a BFA in certain circumstances, such as if the agreement was obtained by fraud or if it is impracticable to carry out the agreement. It is essential to seek legal advice if you believe your BFA should be set aside. 

Key Considerations When Drafting a BFA 

When drafting a BFA, it is crucial to consider the following aspects: 

• Full Disclosure: Both parties must fully disclose their financial situation, including assets, liabilities, and income. Failure to do so can result in the agreement being set aside.
• Fairness: The agreement should be fair and reasonable to both parties. If the court finds the agreement to be significantly unfair, it may set it aside.
• Independent Legal Advice: Each party must receive independent legal advice to ensure they understand the implications of the agreement.

Benefits of a BFA BFAs offer several benefits, including: 

• Certainty: Provides certainty about how assets and finances will be divided in the event of separation.
• Cost-Effective: Can save time and money by avoiding lengthy court proceedings.
• Flexibility: Allows couples to tailor the agreement to their specific needs and circumstances.

Common Pitfalls and How to Avoid Them While BFAs can be beneficial, there are common pitfalls to be aware of: 

• Lack of Full Disclosure: Ensure all financial information is fully disclosed to avoid the agreement being set aside.
• Inadequate Legal Advice: Both parties must receive comprehensive legal advice to understand their rights and obligations.
• Unfair Terms: Ensure the terms of the agreement are fair and reasonable to both parties.

Real-World Examples and Case Studies To better understand the importance and implications of BFAs, let's look at some real-world examples and case studies: 

• Thorne & Kennedy Case: This High Court case highlighted the importance of fairness and full disclosure in BFAs. The court set aside the agreement due to significant power imbalances and lack of proper legal advice.
• Beroni & Corelli Case: In this case, the Trial Judge found that the Wife's limited grasp of English and her position of special disadvantage vis-à-vis the Husband meant that she did not exercise free will when executing the BFA. On appeal, the Full Court of the Family Court of Australia affirmed the decision of the Trial Judge and set aside the BFA.

Conclusion Binding Financial Agreements are a valuable tool for couples in Australia to manage their financial arrangements and avoid potential disputes. However, it is crucial to ensure that the agreement complies with legal requirements and that both parties receive independent legal advice. By understanding the key considerations and potential pitfalls, couples can create a fair and effective BFA that protects their financial interests. 

I hope this helps! If you have any specific questions or need further assistance, feel free to contact one of our family lawyers on 02 9707 3888.