Sometimes people know these agreements as ‘prenuptial agreements’ but the legal term is ‘financial agreements’. Sections 90B-90KA of the Family Law Act 1975 deal with financial agreements by parties to a marriage. … You can make a financial agreement before, during or after a marriage or de facto relationship.
Binding Financial Agreements (BFA) cover the division of property between the parties, superannuation and/or spousal maintenance. In dealing with these matters a BFA will outline how the parties are to manage their financial affairs. The purpose of a Binding Financial Agreements is to avoid the parties going to court to deal with the division of their property.
A BFA might also deal with any potential claims to each other’s estate after death or potential inheritances. A Binding Financial Agreement entered into before marriage or before the commencement of a de facto agreement (also known as a “pre-nuptial agreement”) would generally outline how the parties are to distribute their property in the event of separation.
When can you enter into a Binding financial agreement (BFA)?
A Binding Financial Agreement (BFA) can be entered in to at different stages of the relationship, each of which is dealt with under a separate section of the Family Law Act.
They are as follows:
- In contemplation of a marriage (section 90B);
- In contemplation of a de facto relationship (section 90UB);
- During a marriage (section 90C);
- During a de facto relationship (section 90UC);
- After divorce (section 90D); or
- After a breakdown of a de facto relationship (section 90UD).
What makes a financial agreement "binding"?
Pursuant to the requirements of the Family Law Act (section 90G) a BFA is only binding if the following occurs:
- the agreement is signed by all parties; and
- before signing the agreement, each spouse party was provided with independent legal advice from a legal practitioner about the effect of the agreement on the rights of that party and about the advantages and disadvantages, at the time that the advice was provided, to that party of making the agreement; and
- either before or after signing the agreement, each spouse party was provided with a signed statement by the legal practitioner stating that the advice referred to in paragraph (b) was provided to that party (whether or not the statement is annexed to the agreement); and
- a copy of the statement referred to in paragraph (c) that was provided to a spouse party is given to the other spouse party or to a legal practitioner for the other spouse party; and
- the agreement has not been terminated and has not been set aside by a court.
If the above requirements are not met the BFA would not be binding on the parties.
Can a binding financial agreement be set aside?
A BFA can be set aside by a court in accordance with section 90K or 90UM of the Family Law Act, if:
- there is evidence of fraud (this could include a failure to disclose assets or liabilities at the time the agreement was made).
- the agreement was entered into solely for the purpose to defraud or defeat a creditor or was entered into with reckless disregard to a creditor’s interests.
- one party is experiencing hardship due to the agreement or in relation to a child of the parties.
- the agreement is found to be void or unenforceable. This could be due to mistake, public policy, misrepresentation, one party was under duress at the time of execution, there has been a breach of the agreement or unconscionable conduct.
- the agreement is deemed to be impractical due to a change in one or both of the party’s circumstances.
- there is an issue with superannuation, for example: the agreement provides for a superannuation interest that cannot be split.