Nobody gets married with a view to later getting divorced. However, according to the Australian Bureau of Statistics, the number of divorces granted increased by 2,428 (5.2%) in 2017.[1] When emotions are running high at the end of a relationship, dividing assets can make what is already a very difficult time, more traumatic. This process can be lengthy and costly. Often until the assets are divided, parties are unable to emotionally move on and heal from the loss of their relationship.
We’ve seen couples, now more than ever, opt to sign Binding Financial Agreements (‘BFA’) before entering into domestic partnerships and marriages. BFAs can also be entered into during and at the end of a relationship.
What is a BFA?
Similar to a prenuptial agreement, a BFA is legally binding, written agreement that allows two people to choose how to divide property and financial assets in the event of a relationship breakdown. A BFA will record what assets and debts each person brings into the relationship and will dictate how the couple’s finances are to be divided.
Benefits of a BFA
‘If you fail to plan, you are planning to fail.’
BFAs can be a responsible and advantageous choice for those looking to protect their assets.
1. BFAs can facilitate separation or divorce by preventing disagreements with a written document that predetermines how assets are to be divided.
2. A well drafted BFA will significantly minimise costs in the event that the parties decide to separate.
3. BFAs often work to reduce bitterness between the two people involved and has the potential to allow both parties to end the relationship amicably, on better terms. Given the document will provide complete clarity and certainty in the event of a separation, a BFA will mean less confusion when it comes to making decisions and reduce argument between the parties.
4. BFAs provide protection of valuable assets.
Importance of properly writing up a BFA
There are strict requirements before a financial agreement can be considered legally enforceable and it is important that a BFA is drafted appropriately. Some considerations are:
1. They must comply with strict legal guidelines as outlined in the Family Law Act (1975).
2. They must be in writing.
3. Each person must have received independent legal advice before signing the BFA.
4. The legal advice provided must have come from a lawyer in the Australian jurisdiction.
5. Each person must have signed the BFA voluntarily (free from coercion, duress or undue influence).
6. The BFA should contain a complete disclosure of each person’s financial standing.
Interesting articles and cases on the topic of Binding Financial Agreements:
My partner’s ex-wife ‘stole’ my inheritance – https://www.news.com.au/lifestyle/relationships/marriage/my-partners-exwife-stole-my-inheritance/news-story/b42ed29c3f6d18cf66dfb2e9e61ed317
Divorce lawyer’s prenup includes everything, including her Tupperware –
High Court tears up prenuptial agreement between property developer and online bride –
Raleigh & Raleigh [2015] FamCA 625 (30 July 2015), in which a man hands his future wife an agreement he wants her to sign, including terms about her weight and her not “leaving him for a younger man”.
http://www7.austlii.edu.au/cgi-bin/viewdoc/au/cases/cth/FamCA/2015/625.html
Parkes & Parkes [2014] FCCA 102 (24 January 2014), involving a groom who told his love “the wedding was off” unless she signed a prenuptial agreement – three days before the big day.
http://www7.austlii.edu.au/cgi-bin/viewdoc/au/cases/cth/FCCA/2014/102.html
Field & Basson [2012] FMCAfam 188 (15 March 2012) is about a man whose fiancee handed him a prenup the day before the wedding. The bride had won more than $400,000 in the lottery.
http://www7.austlii.edu.au/cgi-bin/viewdoc/au/cases/cth/FMCAfam/2012/188.html
[1] Australian Bureau of Statistics, ‘3310.0 – Marriages and Divorces, Australia, 2017’, Australian Bureau of Statistics (Web Page) <https://www.abs.gov.au/ausstats/abs@.nsf/mf/3310.0>.
