What are Binding Financial Agreements?
Under the Family Law Act 1975 (the Act) a Binding Financial Agreement can be made between two spouses (whether they are married or in a de facto relationship) before, during or after the relationship. The purpose of a Binding Financial Agreement is to determine how the assets and liabilities of the parties in a relationship are to be divided post-separation.
Usually, spouses will enter a Binding Financial Agreement as they wish to protect their assets in the event their relationship breaks down (commonly known as a ‘pre-nuptial agreement’) or parties wish to divide their assets after separation without the need for the Court’s intervention or oversight.
After separation, a Binding Financial Agreement can be advantageous as it allows parties to separate their finances amicably, with certainty and with less costs.
Having a Binding Financial Agreement before or during your relationship also has significant advantages. It can provide certainty around what will happen in the event you do separate from your partner and minimize the emotional distress that comes with needing to make decisions post-separation in regard to finances. A Binding Financial Agreement can also protect your assets which were obtained prior to the relationship.
How ‘Binding’ is a ‘Binding Financial Agreement’?
A Binding Financial Agreement is essentially a contract between the two parties. Under the Act there are certain requirements regarding the form and other legal requirements for an Agreement to be binding, it can also be terminated by agreement. A court will also set aside a Binding financial Agreement in certain circumstances.
Under sections 90G (married parties) and 90UJ (de facto parties) of the Act there are certain requirements for a Binding Financial Agreement to be binding:
- It must be signed by all parties;
- Before signing each party must have received independent legal advice from a lawyer about their rights, and the disadvantages/advantages of the agreement;
- Each party must be provided with a signed statement from a lawyer stating they have received legal advice;
- The signed statement received from the lawyer must be provided to the other party;
- The agreement must not have been terminated or set aside by a court;
- However, the Court still holds some discretion to enforce an agreement if the requirements are not met if it would be ‘unjust and inequitable’ if the agreement were not binding.
Under section 90J (married parties) and 90UC (de facto parties) of the Act parties can also agree to terminate a Binding Financial Agreement. To do this, there must be a provision in the agreement that allows it to be terminated and the making of a written termination agreement. A Termination Agreement is treated very similarly to the Binding Financial Agreement.
Under sections 90K and 90UC of the Act there is a number of circumstances in which a court may set aside a Binding Financial Agreement, this includes:
- The agreement was obtained by fraud, such as not disclosing a material matter or intending to defraud a creditor of a party.
- The agreement is void, voidable or unenforceable which refers to the contractual aspect of a Binding Financial Agreement therefore matters such as mistake and duress can be considered.
- That since the agreement was made it then becomes impractical for the agreement to be carried out.
- A significant change has occurred in relation to a child of the relationship and enforcing the agreement would cause hardship to that child or the child’s carer/parent.
- Issues with any superannuation that is dealt with in the agreement.
- The Court considers it would be just and equitable to set the agreement aside.
What is the difference between Consent Orders and a Binding Financial Agreement?
Consent Orders are made when parties have separated and they make an application to Court to have their financial matters settled by agreement as set out in the Consent Orders.
One of the main differences between Consent Orders and a Binding Financial agreement is that a Court will ensure that the Consent Orders are ‘just and equitable’ in the circumstances. Binding Financial Agreements have no such oversight of a Court therefore they may not be considered ‘fair’ to one party.
Another difference is that when making an application for Consent Orders parties do not need to have a lawyer. If the Court does not find the Consent Orders to be just and equitable the parties may need to attend Court however.
A Binding Financial Agreement can also exclude the parties from seeking spousal maintenance from each other in the future, whereas a Court cannot order this. A spouse can seek spousal maintenance 12 months after a divorce or up to two years after separation of a de facto relationship, so a Binding Financial Agreement can provide certainty around this.
Lastly, a Binding Financial Agreement can be made at any point during a relationship, whereas Consent Orders are only made once parties have separated.
If you need legal advice in relation to a Binding Financial Agreement, or would like a Binding Financial Agreement written, please contact the experienced team at Miller Sockhill Lawyers on 07 5444 4750 for advice.