Pros and Cons of Entering into A Binding Financial Agreement (BFA)

The phrase Binding Financial Agreement is a type of agreement that deals with financial aspect of a relationship.

Since 2001 married couples in Australia could enter into a BFA pursuant to the Family Law Act. In 2009 the Family Law Act was amended such that de facto property settlement issues were able to be dealt with under the federal legislation, thus placing all disputes in relation to the division of assets of a relationship under the one law.

Entering into a BFA enables parties to a relationship to reach agreement, sometimes in advance, about who their assets, liabilities and financial resources will be dealt with upon the conclusion of the relationship (if that occurs).

The Pros of having a BFA

The pros of a BFA will depend on each individual relationship, however in general terms, some of the advantages can include:

• Having your own rules in place about the financial aspects of your relationship, made in happier times, often results in an agreement which is more likely to be considered by all parties to be fair and reasonable.
• It can provide comfort and certainty for a party who has already been through a long and protracted property settlement dispute.
• A BFA can protect pre-existing assets from claims by the other party to the relationship, which is particularly relevant and important when one party is in a superior financial position to the other. Often one party has accumulated assets prior to the commencement of a relationship without contribution from the other party and it is not to be unexpected that they wish to ensure those assets remain theirs upon separation. Further, a party could be likely to receive an inheritance from their family, the receipt of which they also wish to protect.
• BFAs can dictate how joint property can be acquired, financially maintained, and dealt with if separation occurs.
• Post separation property settlement negotiations are often more cost effective and timely if a BFA is in place.

The Cons of having a BFA

As with any legal process, there are risks and concerns when entering into a BFA and those will depend on the circumstances of the individual relationship and couple. In general terms, some disadvantages of a BFA can include:

• There is no regulatory or supervisory role adopted by the Court when parties are entering into a BFA. BFA’s are not registered with the Court and the Court only becomes aware of the terms of a BFA if they are challenged by a party to them.
• Each party is required to obtain legal advice regarding the terms of the BFA and the effect of the agreement on their rights. Whilst we view it a good thing that parties are required to obtain such advice, it can lead to disputes about the terms of the agreement, if one party is cautioned against signing the document.
• The law surrounding BFA is complex and uncertain, particularly regarding the circumstances within which a Court would set aside a BFA.

Is a BFA really worthwhile?

The use of a BFA is a way to resolve joint assets without spending hefty Court fees.

However, for a BFA to be binding and enforceable and therefore worthwhile, the requirements of the Family Law Act must be complied with strictly. Often parties seek advice on a DIY precedent BFA, downloaded for a fee and completed by the parties. These agreements are fraught with danger and often not worth the costs incurred by the parties to download them.

Fundamental rules for a BFA include:

• It must be in writing.
• It must be stated to be entered pursuant to the correct section of the Family Law Act.
• It must be signed by all parties.
• It must be signed only after each party has received independent legal advice on the nature of the agreement, the effect of the agreement on their rights, the advantages and disadvantages of the agreement to the party at the time of entering into it.
• Each parties Solicitor must sign a Certificate of Legal Advice and copies of that Certificate must be provided to each party.

The Family Law Courts do not set agreements aside, just because they are unfair. There must be conduct such as fraud, duress, unconscionable conduct, or material non-disclosure before a Court will consider intervening in the agreement reached.

If you would like to have a Binding Financial Agreement or Consent Orders drafted, Straits Lawyers are now offering online services at https://straits-lawyers.square.site/product/family-law-binding-financial-agreement-consultation-bfa-/5?cs=true.

Alternatively, you send us an email at info@straitslawyers.com or give us a call on 8410 9069 to arrange an appointment for an online interview.

Please note that this article does not constitute legal advice and Straits Lawyers will not be legally responsible for any actions you take based on this article.