What is a BFA?
When someone in Australia is talking about a Binding Financial Agreement (BFA) they are generally referring to what is colloquially known as a “prenup” or prenuptial agreement. However, BFA’s can also operate as a contractual arrangement to finalise a marriage or de facto relationship (in lieu of Court Orders), and they can also be entered into during a marriage (or de facto relationship).
In real terms, BFAs should be simply referred to as financial agreements, as it is ultimately the Court who will determine whether they are binding in the event of challenge. In deciding whether a financial agreement is binding, the Court will consider the circumstances surrounding its creation, including whether strict legal technical requirements have been complied with.
A BFA can determine how in the event of a breakdown of marriage (or de facto relationship), all or any of the parties’ assets or financial resources of either or both of them, spousal maintenance matters, or matters incidental or ancillary to those, are dealt with. They can be an effective means of protecting a partner’s assets that they have brought into the relationship, and gifts and inheritances received, which is becoming increasingly more common in the current economic climate where the “bank of mum and dad” is being called upon to help their children get into the property market.
When is a BFA binding?
For a BFA to be binding, each party must receive independent legal advice. They are technical documents and “cookie cutter” approaches remain unsatisfactory and are often scrutinised by the Court. We would always recommend that a specialist BFA family law firm with specific expertise in preparing these types of agreements be engaged.
The Family Law Act provides that a financial agreement is binding on the parties to the agreement, if and only if:
- The agreement is signed by all parties; and
- Before signing the agreement, each spouse (or de facto) party was provided with independent legal advice from a legal practitioner about the effect of the agreements on the rights of that party and about the advantages and disadvantages (at the time the advice was provided) to that party of making the agreement; and
- Each spouse (or de facto) party was provided with a signed statement by the legal practitioner providing that advice; and
- A copy of the respective signed statements are exchanged between the parties (or their legal practitioners); and
- The agreement has not been terminated and has not been set aside by a court.
When can a BFA be set aside?
The Family Law Act provides an exhaustive list of reasons that a Court may decide to exercise its discretion to set aside a BFA.
Some of the most common reasons that we see result in BFAs being set aside are the following:
- Failure to disclose material matters (fraud).
- The agreement is unenforceable or void as it is procured in circumstances where one party has effectively been forced to enter into it by the other party (similar to a “shotgun wedding”).
- The parties have failed to adequately consider how having a child or children impacts upon their agreement.
Though the Courts are not required to consider the fairness of the agreement, where a BFA is grossly unfair or significantly favours one party to the other’s detriment, the Court will generally use its best endeavours to try and find fault with the agreement.
Accordingly, we always recommend that parties consider the fairness of their BFA and to use their best endeavours to make the terms fair, just and equitable to all concerned. BFAs should include provision in the event of the parties having children and/or should be updated when major life events occur (including but not limited to having children, the sale of a business, or sale/purchase of a significant asset).
How much does a BFA cost?
Like most things in life, you get what you pay for. Whilst “cookie cutter” BFAs exist, experienced practitioners eschew them as they are frequently subject to challenge and often set aside. Whilst a technical financial agreement may not be cheap, neither is good health or travel insurance. Their true value is only realised when they are either called upon, upheld or set aside.
BFAs are not simple documents, and everyone’s circumstances are different. An experienced BFA lawyer (prenup lawyer), should be engaged to prepare a tailored agreement that is appropriate for your (and your partner’s) unique circumstances.
How do I get a BFA?
If you need assistance with having a BFA prepared or are seeking advice as to whether an existing BFA that you have entered into could be challenged, the first step is to book an initial consultation with the experienced BFA and family law specialists at Doolan Callaghan Family Lawyers.
Our North Shore and Northern Beaches family law specialists’ team have over 80 years of combined family law and BFA experience.
Call us on 02 9984 7411 to book your initial consultation with a BFA and family law specialist.