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BINDING FINANCIAL AGREEMENTS

 

Also known as prenuptial agreements, binding financial agreements (BFA) set out how the parties to a marriage or defacto partnership wish to deal with their property or financial resources in the event of separation or divorce.  Parties can entered into a BFA before, during or after marriage or the end of their defacto partnership. There is a strict timeline for a BFA to be made within a year of the parties receiving their divorce orders.

 

BFAs and the Family Law Act 1975

The Family Law Act (the Act) sets out strict requirements for BFAs to be considered binding. BFAs are governed by sections 90B to 90K of the Act for married couples and 90UA to 90UN of the Act for defacto partnerships. The parties must obtain their own individual independent legal advice prior to signing the BFA.

 

A BFA is binding only when:

  1. It is in writing and both parties have signed.

  2. The parties will enter into marriage or a defacto partnership, are married or separated or divorced.

  3. The parties must receive independent legal advice about the advantages and disadvantages of the BFA,

  4. Before or after signing the BFA, the parties are provided with certificates signed by their legal advisors.

  5. The certificates are given to the other party or their legal advisor.

  6. The court has not set aside the BFA.

  7. The BFA includes a separation declaration unless it is signed after a divorce.

 

Differences between consent orders and BFAs:

  1. Consent orders and binding financial agreements both require the cooperation of the parties to a separation, but their creation and enforceability are quite different.

  2. Consent orders, though agreed by the parties are to be filed with the Court. This means the Court will have the ultimate power to decide whether to grant the orders. The Court will make the consent orders if they believe these are just and equitable meaning they are fair to both parties.

  3. Binding Financial Agreements are contracts that doesn’t require filing with the Court. This may reflect a settlement that is more advantageous to one party instead of being just and equitable. They allow couples to agree in advance of any separation on what would be an acceptable division of their assets.

  4. Consent orders are enforceable by the court but binding financial agreements are only enforceable if they have complied with the strict requirements under the Family Law Act. These rules can cause the binding financial agreement to be unenforceable or automatically terminated. A binding financial agreement can be set aside by the Family Court under sections 90k and 90UM of the Family Law Act. Some of these circumstances include if the binding financial agreement was obtained by fraud or there has been a material change in circumstances that make it impracticable for the Agreement to be carried out.

 

Termination:

Section 90K for married couples and section 90UM for defacto relationships under the Family Law Act sets out certain situations where a BFA can be terminated. Some of the situations are:

  1. The agreement was obtained by fraud or material non-disclosure.

  2. A party entered into the binding financial agreement with the intention of defrauding or defeating creditors.

  3. The agreement does not comply with section 90G or section 90UJ of the Family Law Act and is therefore unenforceable.

  4. Circumstances have changed since the Binding Financial Agreement was made that make it impossible to be carried out.

 

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Please note: The content of our publication is intended for general information purposes only, and should not be construed as legal advice on any matter. Please contact our firm for discussion of your particular circumstances.

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