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Binding Financial Agreement
A binding financial agreement, commonly known as a prenuptial agreement or prenup, is an agreement that two people enter into to determine how their assets will be split if their relationship breaks down.
No one ever enters into a relationship expecting it to breakdown, but the reality is that they sometimes do. A binding financial agreement is an insurance policy for you to fall back on if things do go wrong.
The family court system is a notoriously stressful, emotionally charged and expensive process to navigate. This means a binding financial agreement can be an effective way to protect assets whilst potentially avoiding the pitfalls of litigation in court.
Why appoint a binding financial agreement lawyer from Lawpoint?
A binding financial agreement is a complex document that is subject to strict legal requirements. It is not uncommon for an agreement to be set aside by the court because they have been poorly drafted or because a party has not received proper advice prior to signing the agreement. When this happens, it costs you in time delays and additional fees to re draft the agreement.
It is essential that you obtain specialised advice from an experienced binding financial agreement lawyer who can tailor the agreement to meet your individual circumstances and ensure that it is correctly drafted.
Lawpoint has extensive experience in all aspects of family law including drafting and advising on binding financial agreements. Our many client reviews demonstrate our sharp legal skills and strong commitment to client outcomes.
What are binding financial agreements?
Binding financial agreements are governed by the Family Law Act 1975. Married and de facto couples can enter into these agreements at any stage of their relationship, however it is preferable that it is entered into at the beginning of the relationship to give certainty to parties from the outset of their relationship.
A binding financial agreement is a highly technical document that requires the expert assistance of a binding financial agreement lawyer.
A well drafted binding financial agreement can protect your assets at the beginning of a relationship, resulting in a fairer outcome for a party who comes into a relationship with significantly more assets than the other party.
What are the general features of a binding financial agreement?
By entering into a binding financial agreement, you are effectively contracting out of the provisions of the Family Law Act 1975 (Act) that would otherwise determine the division of a couple’s asset pool and entitlements to spouse maintenance upon the breakdown of their relationship.
A binding financial agreement is entered into outside the supervisory jurisdiction of the Federal Circuit Court and Family Court of Australia (Court) in that the binding financial agreement is binding without the need to be registered with the Court or contained within Court approved consent orders.
The agreement can be entered into before marriage, during marriage or after the breakdown of the marriage.
A binding financial agreement must comply with strict technical requirements set out in the Family Law Act (1975) including:
- The agreement must be in writing and signed by both parties to the relationship.
- Before each person signs the agreement, each of them must be provided with independent legal advice about the effect of the agreement on that party’s rights and the advantages and disadvantages of entering into the agreement.
- The binding financial agreement must contain a statement by each party’s lawyer confirming that they have been provided with this advice. This statement must be signed by the lawyer and given to his or her client;
- Each party must receive a copy of the signed binding financial agreement including the statements signed by each of the lawyers.
Some of the advantages of parties entering into a binding financial agreement include;
- The relatively quicker and cost-effective way to agree to a split of assets, liabilities and superannuation as opposed to making an application to the court.
- The binding financial agreement allows parties to eliminate a spouse maintenance claim which cannot be completely achieved in the traditional court order settlement process.
- Potentially avoiding or reducing the stress and financial costs of being involved in legal proceedings. In the case of the relationship ending, costs are minimised and the dispute is resolved by simply referring to the agreement.
- The interest of the parties is guarded and provided for by the requirement that each of them has to obtain independent legal advice before the agreement is signed.
The general disadvantages of parties entering into a binding financial agreement include;
- There are more grounds for a court to set aside a binding financial agreement as compared with consent orders.
- Binding financial agreements can make it more difficult to make proper provision for various events and all contingencies.
- There is no requirement that the binding financial agreement be just and equitable as is the case with consent orders approved by the court.
- Financial agreements may be void if they do not strictly comply with particular formalities under the Act. This is why it is essential to ensure that your binding financial agreement is prepared by an experienced binding financial agreement law experienced in family law matters.
Is a binding financial agreement really binding?
It is important to note that in Australia a binding financial agreement is only “binding” up to a point. The Family Law Act 1975 has provisions permitting a party to a binding financial agreement to make an application to set the agreement aside, in limited circumstances. A binding financial agreement is not immune from challenge.
Apart from challenging the document on technical legal grounds if it does not strictly comply with the requirements of the Act, a binding financial agreement can also be set aside in various other circumstances. The broad categories include:
- The binding financial agreement was obtained by fraud or duress.
- The binding financial agreement was entered into for the purposes of defeating the interest of another party in circumstances where there was reckless disregard for the interest of that person.
- The agreement is void or unenforceable.
- Since the making of the binding financial agreement one party’s circumstances have changed so as to make it impractical for the agreement or part of the agreement to be carried out.
- Since the making of the agreement a material change in circumstances has occurred and those circumstances relate to the care, welfare and development of a child of the relationship and as a result of the change the child or the applicant who cares for the child will suffer hardship if the court does not set the agreement aside.
- One party to the agreement engaged in conduct that was in all the circumstances unconscionable in respect of the making of the agreement.
Grounds (i) and (iv) above can be invoked, if for example, one party deliberately undervalues or hides an asset from the other party, such that had the other party have known about the asset or the true value, they would not have entered into the binding financial agreement.
If a binding financial agreement is set aside by a court, each party is then able to apply to the court for property orders in the normal way. You can read more about the process the court undertakes here.
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