A “Binding Financial Agreement” (or BFA) is a legal document that allows couples (married or de facto) to put in writing what they would like to happen to their property if their relationship breaks down. They can be entered into before, during, and after a de facto relationship or marriage, and after separation prior to divorce or after divorce for married spouses.
Financial Agreements may deal with the division of real and personal property, superannuation, and spousal maintenance.
Financial Agreement in Contemplation of a Relationship/Marriage
The topic of a Binding Financial Agreement prior to a de facto relationship or marriage commencing may be a sensitive topic. However, for those of us who wish to avoid the Amber Heard/Johnny Depp scenarios of life, it is a conversation worth having. If you are contemplating entering a relationship, de facto or marital, and wish to quarantine particular assets and liabilities that you have brought into the relationship, and plan what is to happen with jointly acquired assets and liabilities, then you may wish to consider contacting us at Salerno Law.
Many of our client wish to quarantine assets for the future benefit of children of a previous marriage or relationship, and to leave those assets in their wills or to gift some of those assets to their children during their lifetime. This goal to preserve certain assets from future claim by an intended or current marital or de facto spouse, is achieved by a properly drafted financial agreement.
We have probably all heard the American term “Pre Nup” and are aware of the tumultuous nature of celebrity divorces in some American States with “fault-based” divorce systems. A pre-nuptial financial agreement in Australia allows one or both parties to quarantine particular assets brought by them to the relationship, and for each party to agree on which liabilities are the responsibility of which party prior to the commencement of a marriage. Such an agreement may either unilaterally or mutually quarantine assets and liabilities.
For example, if Amber had a liability from her veterinarian because her dog was stung by a bee, her new husband might consider having that liability quarantined to her in the prenuptial agreement. Amber might also wish to quarantine ownership of the dog if the parties were to separate or divorce so that she remains the owner. Of course, we are not always talking about the small things, and a prenuptial agreement would address significant assets and liabilities brought into the relationship by each party, as well as the assets and liabilities acquired during the new relationship, whether acquired individually or jointly, and how those items are to be divided in the event of separation or divorce.
In this way, Binding Financial Agreements make the separation process more manageable and reduces the economic and emotional stressors that occur in the absence of such an agreement.
Binding Financial Agreements are also the only legal document under the Australian Family Law Legal System to fully extinguish spousal maintenance claims from a former spouse, which maintenance claim would potentially be available to a former spouse if:
- they had financial need;
- you had financial capacity to meet their need; and
- at the time of their financial need, they had not entered into a new de facto or marital relationship.
Again, we have all been saturated by Amber Heard/Johnny Depp type of celebrity alimony images and cases. Alimony is essentially spousal maintenances under the Family Law Act 1975 in Australia. Extinguishment of and final release from spousal maintenance (after separation), as a ”clean break” from a spouse, is another important benefit of a properly drafted financial agreement.
Financial Agreements require each party to receive their own independent legal advice from a practicing Australian lawyer and the Act provides that the same lawyer is not allowed to advise both parties. Each party’s lawyer must sign a certificate of independent legal advice as to the following:
- The effect of this agreement on their rights; and
- The advantages and disadvantages, at the time that the advice was provided, to my client of making this agreement.
If you are considering mutual or unilateral quarantine of assets, we recommend that you call our friendly family law team and Salerno Law for a consultation.
Family law is a highly emotional and complex area of law where families navigate through parenting, property and relationships disputes.
During these times, you need a competent and experienced family law expert who understands what you are going through, thinks carefully and proactively on your behalf and knows how to represent you for the best possible outcome.
If you want to understand your rights, contact Salerno Law and discover why we are Gold Coast’s best family lawyers.
By Lindsay Nicholson