A binding financial agreement, or BFA, is essentially a written agreement to determine how you and your ex-partner will divide your assets. Both married couples or those in a de-facto relationship can enter into a BFA once separated (the relationship is over for good).
I’M ABOUT TO GET MARRIED. DO I NEED A FINANCIAL AGREEMENT?
There is no right or wrong answer to this. Some of the common reasons people might enter into a binding financial agreement before the commencement of a marriage may include:
- you are bringing substantial assets into the marriage;
- you are likely to receive a substantial inheritance at some point in your marriage;
- you have a particular asset you want to protect;
- you want certainty of outcome if your marriage breaks down; or
- you have children you want to provide for in the event of a marriage breakdown.
Entering into a BFA before marriage is often called a prenuptial agreement or “prenup”), which you can read more about here.
Can we get a BFA if we’re already separated?
If you are separated or divorced with no prior arrangements, you can still enter into a BFA to secure the division of your finances. Contact us today to find out more.
Entering into a BFA after separation is the most common. It sets out how you will divide assets now that the relationship is over (as opposed to a prenup before the relationship, which requires future thinking). The BFA after the separation is more final because you know exactly what assets you have and how they will be split. If you can’t reach an agreement, you may consider going to court over property litigation.
Because of its specificity, the court is not as involved (compared to processes like Consent Orders). The court only ever gets involved over disagreements with a BFA, which often don’t occur because the agreement outlines how you will resolve any disputes, with ‘backup’ clauses to ensure the right actions are in place to fix issues.
Skip the queue! BFA’s do not go through the court system. With a BFA, the court is not concerned in ‘fair’ or equitable distribution, but more with the agreement itself. This can be of benefit to you and your ex-partner, as it allows the process to be over much quicker.
How it Works
The first, most important step is to have a finalised agreement between you and your partner. What will you split? Who will keep what? Both parties should freely agree into the proposed split without influence, pressure, fraud, or bad conduct etc.
Next, your agreement gets drafted by our expert family lawyers. This draft BFA outlines your agreement, with specifics to cover everything.
Once drafted, depending on your partner’s independent legal advice, we can review, make amendments, and negotiate to a better outcome for you. This optional extra covers a more in depth process. To find out more on our pricing, please contact us for a free discussion.
The BFA is then signed by both parties. Independent legal advice (i.e both of you getting advice from separate lawyers) has to occur with confirmation of this legal advice making up part of the BFA.
Finally, the BFA comes into effect, with both parties obligated to action whatever is enforced/set out in the agreement. This often is the quickest route to a legally binding agreement and avoids extensive court control.
What does BFA cover?
BFA’s generally cover financial assets and debts like money in bank accounts, stocks and investments, and superannuation. The most important asset, often the family home, is one of the key features in the BFA. They also cover vehicles and future spousal maintenance.
They can’t cover parenting-related matters or child support, (but can cover financial outcomes?). Child support assessments can be obtained via services australia or through a separate binding child support agreement or standard Consent Order. Parenting visitation agreements are also usually achieved through Consent Orders.
BFA’s are more focused on the agreement and getting it locked in and over with. This allows for a quicker process as it skips the court process. There’s also more flexibility in the agreement if you and your ex-partner are amicable. If there are complex assets e.g business assets, leases on commercial property etc, then it’s easier to focus on specific agreements through a BFA.
Benefits of a BFA
- Specificity of terms, so you have more certainty in the outcomes of the agreement.
- Save time as you don't have to go through extensive court process
- There is more certainty with a BFA. Court’s are unlikely to get involved.
- If both parties are happy, there’s no further interference.
- Resolve quicker and move on.
- Stamp duty and other possible exemptions on property transfer etc.
WHAT IS THE DIFFERENCE BETWEEN CONSENT ORDERS AND A BINDING FINANCIAL AGREEMENT?
Consent orders and BFAs are the two options separating couples have for making their property and financial agreement legally binding. There are substantial differences between the two.
What can be included?
Consent orders can include arrangements for your children, whereas BFAs are for the purpose of property and financial matters only.
When can they be made?
Consent orders can only be made after separation. BFAs can be entered into before, during or after a marriage or de facto relationship.
It is not compulsory to receive legal advice for consent orders, though it is recommended. It is, however, a strict requirement for both parties when entering into a BFA. A BFA is not valid if either party has failed to obtain independent legal advice.
Just and equitable
Consent orders are lodged at the Family Court of WA, which will then determine whether the proposed property and financial orders are just and equitable.
BFAs, on the other hand, are not lodged at the Family Court at all. A BFA is essentially a legally binding contract between you and your partner or ex-partner.
Getting a BFA with MKI Legal - How the process looks
- We draft your BFA. Bring a list of assets and liabilities of the relationship, what the agreement is in terms of the split, e.g who is keeping the house, refinancing time frames, other financial details. We can take into account any agreement, and help develop your proposed split.
- We get a run down on the length of the relationship, contributions, if there are children and how they are looked after.
- Lawyers on both sides fulfil their obligation to provide independent legal advice. (We can do this for you, or the person engaging us to draft the BFA).
- We can go one step further to consult/review the BFA and propose changes, and negotiate. (different pathway, more extensive service offering)
CAN I DRAFT A BINDING FINANCIAL AGREEMENT MYSELF?
We do not recommend clients draft their own financial agreements, as important details may be missed or drafted in such a way that might be misinterpreted.
This means that your BFA may not meet the requirements for it to be considered legally binding.
DO I NEED A LAWYER IN THIS PROCESS?
In order for your BFA to be legally binding, both parties need to obtain independent legal advice, which is usually confirmed in a letter. This letter sets out the advantages and disadvantages of entering into the BFA, and its effects on your legal rights. Each party’s lawyer also needs to sign a certificate of independent legal advice, which must be attached to the back of the BFA.
Getting started - What we need
- An overview of your financial situation
- Breakdown of assets and liabilities - ownership, estimated values etc.
- Contributions of the relationship - who did what?
- Agreement of the proposed division (negotiated and accepted prior between you and your ex-partner through reasonable discussion).
Walter v Ivanov 
In this case, the parties met online. The husband was 67 years old and the wife was 36 years old, from a European background and living overseas.
The husband was a wealthy Australian property developer with assets worth about $18 million dollars.
At the start of the relationship, Mr Walter told the wife that she would need to ‘sign an agreement’ if they were to get married, and that his money was for his children, from his previous marriage.
Ms Ivanov agreed and moved to Australia. The couple planned their wedding and Ms Ivanov invited her family from overseas to attend. Eleven days prior to the wedding, Mr Walter presented Ms Ivanov with a BFA and told her that if she did not sign the agreement, the wedding would be called off. She signed the BFA four days prior to the wedding.
The terms of the BFA provided that the wife receive a payment of $50,000 after at least three years of marriage.
The parties separated about four and a half years later. The wife sought relief from the Federal Circuit Court of Australia seeking an order that the BFA be set aside and that she receive a much higher amount.
Ms Ivanov was successful in her application and the court found the financial agreement should be set aside for unconscionable conduct.
CAN MY PARTNER AND I HAVE THE SAME LAWYER PROVIDE A CERTIFICATE OF INDEPENDENT LEGAL ADVICE?
No. “Independent legal advice” means that you and your partner need to have different lawyers advise you about the BFA.
CAN I INCLUDE CHILDREN’S ISSUES IN A BINDING FINANCIAL AGREEMENT?
No. BFAs are only for property and financial matters.
ARE THERE ANY CIRCUMSTANCES IN WHICH A FINANCIAL AGREEMENT MIGHT BE DEEMED INVALID?
There are limited situations in which this might happen. This may include things like:
- Fraud- The agreement was made fraudulently, for example if there was material non-disclosure of assets.
- Duress- this means being forced into doing something. This does not mean that the other party literally has to force your pen to paper, but rather that there are circumstances in which a party has felt bullied or pressured into signing.
- Unconscionability- The agreement was made unconscionably. This means that one party used their position of power to make the other sign the binding financial agreement, to the extent that it may not be deemed to have been made under their own free will.
Our family lawyers are here to help you
Not Sure What To Do Next?Free Discussion
The family law team at MKI Legal can assist you with any questions about your family law matter, separation, splitting your assets or your children. We can help you make the right decision on what to do next.