What is it?

A binding financial agreement (previously referred to as pre-nup) (“the BFA”) is made between couples who are de factoes, soon to be married or already married. It can be entered into either before, during or after their relationship or their marriage. A BFA can be made between de facto couples of the same sex.

The BFA states how your assets, financial resources and liabilities will be divided if your relationship or marriage breaks down.

 

By making the BFA, the parties lose their right, which they would otherwise have, to apply to the Family Court of Western Australia (“the Court”) to resolve the division of their assets and liabilities between them after they separate.

 

BFAs allow both parties to agree in advance how their assets and liabilities will be divided if their relationship or their marriage fails.
Who can do a BFA?

Typically, the couples who enter into the BFA include those who are:

  • Cohabitating or intending to cohabit;
  • Married or intending to get married;
  • Already separated; and/or
  • Divorced

Both parties who want to enter into the BFA must ordinarily be residents in Australia.

 

Each of the parties must have their own independent legal advice about the terms of the BFA, and each of their lawyers must provide a certificate confirming they have given the party legal advice.

 

It is important to know that the independent advice for the parties cannot be given by the same lawyer and should not be given by lawyers working for the same firm.

 

It is usually not recommended that couples sign their BFA in the days leading up to their wedding as it could later be argued that the agreement was signed under duress and, because of this, should be set aside.

 

However, it is never too late to enter into the BFA. You can enter into the BFA at any time during or even after your relationship or marriage.

What terms should be included?
The type of issues that you and your partner can agree on and document in the BFA, can include:

  • How you will hold any assets and debts that you acquire during the relationship or marriage;
  • What happens to the assets you already own and the debts you already have; and/or
  • How you will divide any assets and debts after the relationship or marriage breaks down.

How binding is a BFA?

For the BFA to be binding and enforceable enforced by the Court it has to meet certain requirements.

The requirements are as follows:

  • the BFA must be in writing and state what type of agreement it is;
  • the BFA must be signed by both parties;
  • each party must obtain independent legal advice before signing the BFA;
  • the lawyers giving advice must sign the required certificate confirming that the advice has been given; and
  • a copy of each certificate must be provided to both parties.

Having a BFA in place, which would found binding by the Court, requires careful drafting as it can be a complicated document to prepare.

 

There is no iron clad guarantee that a BFA will be completely binding and enforceable as there is always a possibility that one of the parties may successfully apply to have it set aside.

 

However, generally speaking, simply having the BFA in place means that it is less likely that you will end up in the Court arguing over your assets and liabilities.

Are BFAs helpful for estate planning?
Entering into the BFA offers some legal protection in relation to your assets and liabilities upon your death including protection against a possible claim against your estate under the Family Provision Act 1975 (WA).

 

In these circumstances, it may be possible to use the BFA as evidence of your intentions regarding the financial provision for your partner at the time you made your Will.

How do you break the news to your partner that you want a BFA?
Many clients are concerned that they have to tell their partner that they want to enter into a BFA.

 

In most cases, the other party will have no concerns about entering into a BFA. It is often viewed as a demonstration to their partner that they are in the relationship or the marriage for the right reasons.

 

If your partner does not wish to enter into a BFA, we recommend that you carefully consider whether you have similar approach to your financial goals as your partner has to their.

What are the benefits of having a BFA?
Having a BFA in place means that your mutual agreement is more likely to reflect a division of the assets and liabilities in a way that both parties consider is reasonable. It provides an assurance that your assets are protected, especially if you have already been through a divorce or a separation. It is a simpler and more cost effective tool for dealing with the division of the assets and liabilities following separation, avoiding expensive Court proceedings and emotional distress.

 

For more information contact Havilah Legal