A binding financial agreement ('BFA') is a type of contract between two people who are contemplating entering into a marriage, or are already in one, or are in the process of separation or divorce.
There are three occasions in which couples could consider a BFA:
- Pre-Nup: before the marriage or relationship has been entered into. This is the most common and well-known form of BFA.
- Mid-Nup: during the marriage or relationship
- Post-Nup: after the marriage or relationship, when the couple is initiating separation or divorce proceedings
Contents of BFAs
There are a range of matters which are considered in BFAs including:
- What will happen to the wealth or property which each spouse had before they commenced their relationship
- What will happen to the wealth or property acquired during the course of the relationship
- Who is going to contribute to the costs of raising children, and what proportion will each spouse pay
- If there is a family home, what will happen to it
In order for BFAs to be legally enforceable, there are certain formal procedures and requirements which must be adhered to. Some examples of these requirements include that the BFA must be in writing and signed by both parties, and that both parties must have received independent legal advice about their rights, along with the advantages and disadvantages of the BFA prior to signing it. Additionally, both parties must have given full financial disclosure to each other.
Advantages of BFAs
Finally, here are some advantages of creating a BFA:
- Asset Protection: BFAs grant both parties peace of mind that their assets are safe and secure if the relationship unexpectedly comes to an end. Planning for the future will help parties be less anxious and unsure about how they will divide their property or wealth if this issue arises
- Clear and Fair Asset Division: especially with pre-nuptial agreements, these are often agreed upon when the parties are on good terms with one another. Hence, this avoids conflicts or tensions which may arise after the parties have separated or divorced, which may make it more difficult to clearly and amicably divide the assets.
- Avoiding Court Proceedings: BFAs can be finalised within 1-2 months if both parties agree on its terms. Without this sort of agreement, there is the possibility that parties can only reach a resolution through the Family Court, which can take years. Furthermore, initiating court proceedings carry a range of challenges, including extensive costs and significant emotional burdens.
If you or someone you know wish to discuss this issue further, then please do not hesitate to contact us on 02 8999 9809.