Binding Financial Agreements: What you need to know

Separation and divorce raise difficult questions about how property, assets, and finances should be divided. A Binding Financial Agreement (BFA) is one-way couples can address these questions with greater certainty and control, rather than leaving the outcome to a court to decide. This article explains what a BFA is, when it may be used, and the key issues clients should be aware of before entering into one.

What Is a Binding Financial Agreement?

A BFA is a legally recognised agreement made under the Family Law Act 1975 (Cth) that sets out how a couple's property, financial resources, and liabilities will be divided if the relationship ends. Unlike a consent order made by the court, a BFA is a private agreement negotiated between the parties. It can be entered into:

• Before a marriage or de facto relationship begins (commonly known as a "prenuptial agreement")

• During the relationship

• After separation or divorce

BFAs can also address spousal maintenance, although they cannot deal with parenting arrangements or child support, which remain subject to separate legal frameworks.

Common Issues Clients Should Consider

1. Independent legal advice is essential. For a BFA to be binding, each party must receive independent legal advice from a separate lawyer before signing. Without this, the agreement may later be challenged and set aside.

2. Full and frank financial disclosure. Both parties must disclose their financial position accurately and completely. Failure to do so  whether intentional or accidental can render the agreement vulnerable to challenge down the track.

3. Changing circumstances over time. A BFA drafted years earlier may no longer reflect a couple's current financial reality, particularly following the birth of children, a significant change in income, or the acquisition of new assets. Reviewing and updating an agreement periodically can help avoid disputes later.

4. Risk of the agreement being set aside. Courts retain the power to set aside a BFA in certain circumstances, including where there has been fraud, non-disclosure, duress, or where enforcing the agreement would result in unfairness to a party or a child. Careful drafting reduces this risk but cannot eliminate it entirely.

5. Clarity of drafting. Ambiguous or poorly drafted clauses are a common source of future disputes. A well-prepared BFA should clearly identify assets, liabilities, and the intended division, leaving as little room as possible for differing interpretations.

6. Timing and formality requirements. Strict procedural requirements apply to the preparation and execution of a BFA. Missing a formal requirement such as a solicitor's certificate  can jeopardise the agreement's validity.

Why Legal Guidance Matters

Given the technical requirements and the potential consequences of an invalid or unfair agreement, obtaining experienced legal guidance is essential. A properly drafted and reviewed BFA can provide clarity, reduce future conflict, and protect both parties' interests.

How We Can Help

Our family law team regularly assists clients with:

• Drafting new Binding Financial Agreements

• Reviewing existing agreements for enforceability and fairness

• Advising on rights, risks, and obligations under a proposed agreement