It’s one of the most clichéd story lines in Hollywood – the rich beau, his overprotective family, the sweet but poor girl and that elephant in the room called the ‘pre-nup’.
It happens in real life too and its official title is a Binding Financial Agreement or BFA.
If executed correctly, they can work perfectly.
But one small oversight could see the courts deem them null and void.
Here’s how to avoid some very costly mistakes.
What is a Binding Financial Agreement (BFA)?
A Binding Financial Agreement is a legal document agreed between two parties which has the intention of overriding the Family Law Act 1975.
Its purpose is to agree on the division of assets, should a couple’s relationship break down.
It can guard against adding to the financial and emotional hardship the two parties are likely to already be suffering by avoiding expensive and time-consuming court action.
A BFA can be made before, during or even after a marriage or de facto relationship has dissolved.
Can BFAs be challenged in court?
Everything can be challenged in court. But provided a BFA has been properly drawn up, it will be binding.
But it will need to meet a spate of requirements to guard against any future legal challenge.
That is why it is absolutely critical to obtain quality, independent legal advice from an experienced family lawyer who can draft, sign and store the document, in the event it is ever needed.
Why a BFA might be terminated
A binding financial agreement entered into before marriage must be made in anticipation of marriage otherwise it will be voided.
Equally, an agreement entered into between a de facto couple is automatically voided upon their marriage. A new agreement would then need to be drawn up.
There are many other rules and regulations which may cause the Family Court of Australia to terminate a BFA.
These include but are not limited to:
- If an agreement was reached by fraud because one party failed to disclose all their assets.
- If an agreement is deemed to be voidable or unenforceable i.e. the binding requirements were not fulfilled.
- If circumstances have changed since the agreement was made making it impractical for it or part of it to be executed.
- If the agreement will cause harm to a child or the party that cares for a child.
- If it is found that one party engaged in “unconscionable behaviour”, such as coercing the other party to sign the agreement or not giving them enough time to fully consider it.
It pays to get your BFA right
BFAs can work really well if both parties are invested in it. But there are traps that can render them worthless.
Reviewing a BFA every couple of years or if one or both party’s financial circumstances change significantly is also good practice. This may be the birth of a child or perhaps an inheritance.
Talking to an experienced family lawyer is absolutely essential if you are curious about a BFA and want to ensure it is safe from a future legal challenge.
Nick Boswell is a family lawyer highly experienced in drafting Binding Financial Agreements. Get in touch now to talk about your needs.
The information contained on this article is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.
Legal matters referred to on this website are of a general nature only and are based on Nicholas Boswell & Co Lawyers’ interpretation of laws existing at the time and should not be relied upon in place of appropriate professional advice. Those laws may change from time to time.
Nick’s Family Law specialises in straight forward divorces, divorces involving separation under the one roof, child support agreements, financial arrangements and reaching agreements through negotiation, mediation, collaborative practice and through the court process.
Contact us now for a no obligations discussion about your needs.