Family Law

Binding Financial Agreements

The Family Law Act provides for parties to a marriage or de facto relationship to enter into a binding legal agreement about the financial arrangements that will be in effect in the unfortunate event that the relationship breaks down. This agreement can be entered into before marriage, during the marriage or after separation. Financial Agreements can be viewed as a planning tool to assist in securing the parties’ financial future and to conclude matters in ways that they would have not contemplated prior to preparing the Financial Agreement.

Financial Agreements can cover circumstances where it’s likely a Court will refuse to make property Consent Orders because the agreement reached between parties is not just and equitable. It can also assist in achieving a division of superannuation which is suitable to the parties’ needs and not in the manner prescribed by the Family Law Act, where there is no remedy or adequate remedy provided by the Family Law Act and where the form for the Application for Consent Orders does not reflect the parties’ financial circumstances (such as assets with third parties).

Recent cases in the higher courts suggest that the reliability of Binding Financial Agreements (BFA) is now not as solid as previously thought. Careful planning and significant consultation with lawyers by parties is a must.

A BFA can cover all of the property of the parties. For example, the BFA might specify what happens to all assets (owned prior to the relationship and acquired during the relationship) in the event that separation occurs. On the other hand, the agreement may only be relevant to what is to happen to a particular asset e.g. if one party owned a property prior to the relationship commencing, the BFA might state that the other party has no claim over the property in the event that separation occurs. A BFA can also address the issue of spousal maintenance after separation.

There is a set criteria set out in the Family Law Act for the agreement to be enforceable and binding:

If these requirements are not fulfilled, the BFA will be set aside by a Court. As stated previously, notwithstanding the above factors being satisfied, Courts are increasingly overturning BFAs for equitable reasons and therefore it is imperative you consult a lawyer before entering into one.