It is a fact of life that married life is not all about sunshine and rainbows. In the unfortunate event that couples do separate, it can be a very tedious and stressful experience to begin the separation process, especially when financial matters are concerned.
Separation of assets and property is a major issue for those who are going through divorce or are disbanding a de facto relationship. Fortunately, there are binding financial agreements that can help you sort out the nitty gritty even before you decide to separate.
This article aims to discuss binding financial agreements and how they can help you preserve your assets should you ever decide to separate from your husband, wife, or partner. This is particularly useful even when you are currently single and is deciding to get married.
Here’s everything that you need to know about binding financial agreements in Australia.
What are Binding Financial Agreements?
Binding financial agreements are similar to prenuptial agreements. Prenups, as they are known in the United States, differ slightly from binding financial statements as the former must be signed before marriage. On the other hand, binding financial agreements can be signed before, during, or after a marriage or partnership.
Binding financial agreements are also applicable not only for couples of the opposite sex, not for couples who intend to get married or are divorcing. Binding financial agreements are also valid and applicable for same sex couples as well as for those living under a de facto relationship.
Other than those mentioned above, there is pretty much no other difference between a prenuptial agreement and a binding financial agreement. The content of a BFA would often include:
- A declaration of assets and properties that you are bringing into the relationship
- A declaration of separation or union of future earnings
- Payment of future liabilities and debts
- Division of assets upon dissolution of the marriage or relationship
- Whether spousal support will be provided
It is also very important to you include any clauses that you can think of that can change the above conditions should certain situations occur. For example, you can include in the document a clause that having children or separating after a specific number of years can change division of assets and property, or trigger a specific spousal support amount.
When Should I Have a Binding Financial Agreement?
Data shows that one in three Australians get divorced. While you may think that this won’t happen to you, it is better to be safe than sorry. This is especially true if you are bringing a much larger portion of assets into the marriage or relationship.
In cases of separation without a binding financial agreement in place, the Family Courts will decide on the division of assets based on each individual’s arguments using the guidelines set under the Family Law Act of 1975. Of course, this can be done privately and without the involvement of the court.
Without a binding financial agreement, the division of assets and property, as well as liabilities and debt, may be unfair to one party. With an agreed upon document in place, financial separation will usually be of no fuss as everything will be laid out in detail and would just need to be executed.
Other situations where in a binding financial agreement is a must would include:
- You are entitled to a large inheritance in the future
- You or your partner are bringing in children from a previous relationship
- You are running or involved in a family run business
- You want to protect or ensure that you keep certain assets or properties for yourself
Of course, having a binding financial agreement drawn up is always a good idea regardless of what you think the chances of separating with your current spouse or partner are. A BFA is the best way to protect your interests should you or your partner decide to dissolve your marriage or relationship.
How Do I Create a Binding Financial Agreement?
A binding financial agreement must be done by a lawyer. In fact, two lawyers are required for it to be valid. A certificate will also be required for it to be legally valid. A binding financial agreement that is not reviewed by a lawyer may be deemed as invalid by the courts and set aside.
Creating binding financial agreements can also be a very complicated process. The document must contain full disclosure and must include clauses that you may not have thought of. A reputable family lawyer can help you and advise you on what to put into your agreement with instructions and input from the client.
You should definitely hire a family lawyer when creating a binding financial agreement. They will be able to draft the document for you and include all important content, review any revisions that the other party may include, and oversee your overall protection from beginning to end.
What are the Disadvantages of Having a Binding Financial Agreement?
Asking your partner to agree to a BFA can be a harrowing experience. It can exude an air of mistrust which can hurt a relationship, especially if you are just intending to marry or live together. In some cases, technicalities such as material changes during the relationship or suspicion of fraud can invalidate a BFA.
In some cases, appealing to not follow a signed BFA will be approved by the courts, especially if it was found that the agreement was signed under duress. Changes during the relationship, such as a partner getting a much larger paying job, can put you at a disadvantage if a binding financial agreement is in effect.
Nevertheless, the above risks are outweighed by a BFA’s potential reward. This is especially important if you want to protect your own interests. Having a binding financial agreement in place will help remove any financial issues before, during, or after a relationship. It is also very easy to draw up.
As such, it is recommended to have a binding financial agreement whenever possible. It acts as a safety net for you as well as your spouse and partner as it formalizes, in the eyes of the law, any agreement with regards to your assets and finances, and any future issues can be resolved easily by this document.