A prenuptial agreement (Binding Financial Agreement or BFA) allows couples to structure their financial position ahead of marriage or a de facto relationship. It is especially useful to outline the advantages and disadvantages of asset arrangements, provide clarity on property division, and detail obligations for spousal support or spousal maintenance.
A BFA can be entered into during or even after a relationship but a ‘pre nup’ style Binding Financial Agreement is usually one that the parties enter into in the early stages of the relationship. If you are considering a prenuptial agreement, here are some important things you need to know.
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A financial agreement can be entered into at different stages of a relationship
Do you have to be engaged to have a prenup drafted? No.
The Family Law Act 1975 allows parties to enter into a Binding Financial Agreement:
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- prior to moving in together;
- whilst living together;
- prior to getting married;
- or during a marriage.
De facto couples can make a Binding Financial Agreement, even if they have no intention of ever getting married.
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Prenups can save both parties money, time, and stress
A benefit of a Binding Financial Agreement is that you and your partner have certainty about how your finances and property will be divided (for property settlement) in the event of a divorce. It can also deal with how living expenses, inheritances and gifts will be dealt with during the relationship.
Without a Binding Financial Agreement in place, your finances will be divided in accordance with the Family Law Act 1975 in the event of a relationship breakdown. If the parties cannot reach an agreement as to how finances and property should be divided, financial matters may be dealt with by court litigation. Litigation is a very expensive, long and stressful process that you can avoid with a Binding Financial Agreement.
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Both parties will require independent legal advice before signing a Binding Financial Agreement
For a Binding Financial Agreement to be binding, both parties must receive independent legal advice, and their respective solicitors must sign Certificates of Independent Legal Advice. This process legally requires full understanding of the agreement’s terms and implications.
It is important that both you and your partner receive legal advice independently of each other so that you understand the implications of the agreement and your rights and entitlements.
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Both parties must agree on the content of a Binding Financial Agreement
It can be difficult to talk to your partner about signing a Binding Financial Agreement, and they can refuse to sign. An important element is that both parties sign voluntarily and without pressure. If it is found, at a later date, that undue pressure was placed on one party, the BFA may be declared void.
When talking to your partner about a potential Binding Financial Agreement, we recommend being open and honest about why you wish to have one drafted and be upfront about your plan to manage combined finances and your individual assets as a couple moving forward. This discussion should also include how the property division would work in the case of a future separation.
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A prenup can be overturned or set aside in some limited circumstances
The Federal Circuit and Family Court of Australia can overturn or set aside a Binding Financial Agreement, for example, if:
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- one or both parties did not receive independent legal advice;
- the agreement was entered into by way of fraud;
- one or both parties failed to disclose all assets;
- a party to the agreement engaged in conduct that was unconscionable.
How a family lawyer can help
Engaging a law firm that specialises in family law is recommended to prepare a Binding Financial Agreement. Because a Binding Financial Agreement is a legal agreement in Australia, it legally requires both parties to obtain independent legal advice. If you would like to discuss your situation in more detail, you can book a free, no-obligation phone consultation with one of our lawyers.
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