‘Binding’ Financial Agreements – 3 Reasons Why They Might Not Be So Binding
In recent times, we have seen more couples inquire about entering into pre-nuptial agreements before they take the big leap into marriage. These pre-nuptial agreements are colloquially known as “Binding Financial Agreements” or “BFAs” for short.
DID YOU KNOW? BFA’s can be entered into before during and after a relationship and can be done for Married Couples or Defacto couples.
Sections 90B-90KA of the Family Law Act (Married Couples) and Section 90UA – 90UN of the Family Law Act (Defacto) enable parties to enter into a binding legal agreement for their financial arrangements.
However, there are situations where binding financial agreements may not be so binding, a few of these situations are listed below;
The agreement was obtained by fraud (including non-disclosure of material matter)
When obtaining instructions for a binding financial agreement, Phillips & Wilkins ensures that the party disclose all their financial assets and liabilities. Failure to include an asset (ie an investment property in Queensland) may result in the agreement being set aside. To avoid this occurring, the party should include all assets and liabilities in their agreement.
Failure to obtain independent legal advice
A critical element in BFAs is that each party receive independent legal advice on the advantages and disadvantages of the BFA. This means that each party should receive separate advice from different legal practitioners as to the effect of the agreement. If each party were to receive advice from the same firm of solicitors, this would not be independent legal advice and the agreement may be set aside by the Family Court.
Matters arising since the execution which make the agreement unworkable.
If circumstances have arisen since the agreement was made that make it impractical for the agreement or part of the agreement to be carried, the agreement could be set aside. Such circumstances can include;
- If one of the parties were to come bankrupt
- If a party’s assets were entirely disposed of
- If the parties were to a have a child
- An injury that interferes permanently with the earning capacity of one of the parties.
It is therefore important to have your binding financial agreement reviewed every few years much like your Will as your agreement that was previously binding may no longer be so.
If Items 1-3 can be avoided and all other necessary steps are complied with, a BFA can protect your assets when the honeymoon period is over.
If you are looking to enter into a binding financial agreement or have one reviewed, please do not hesitate to contact our Chris Henderson who can answer your inquiries.
At Phillips & Wilkins, Chris practices in the areas of Property Law, Conveyancing and Family Law. Chris has grown up in the Northern Suburbs and continues to be a part of the local community as being a member of the Old Paradians Amateur Football Club and the Mill Park Cricket Club.