Planning for the future of your relationship includes considering how to protect your financial interests. A Binding Financial Agreement, commonly known as a BFA, provides a legal framework for couples to determine how their assets would be divided if their relationship ends. These agreements can offer peace of mind and clarity during what might otherwise be a difficult time. BFA Lawyers can help ensure these agreements meet all legal requirements and truly protect your interests.

Key Takeaways

• A BFA is a legally binding document that outlines how assets will be divided if a relationship ends
• BFAs require full financial disclosure, independent legal advice, and proper execution to be valid
• These agreements can protect business assets, inheritances, and provide certainty about financial matters
• Courts can set aside BFAs if they involve fraud, duress, or significant changes in circumstances
• Specialist legal advice is essential before entering into or challenging a BFA

What is a Binding Financial Agreement (BFA)?

Definition under Australian family law

A Binding Financial Agreement is a private contract between couples that determines how their financial assets will be divided if their relationship breaks down. Under the Family Law Act 1975, these agreements allow couples to make their own arrangements outside the court system. They can cover property, financial resources, and spousal maintenance.

Types of BFAs

There are several types of BFAs that couples can enter into at different stages of their relationship:

• Prenuptial agreements – made before marriage
• Postnuptial agreements – made during marriage
• Separation agreements – made when a relationship ends
• De facto financial agreements – for couples in de facto relationships

Who can enter a BFA?

Both married couples and de facto partners (including same-sex couples) can enter into BFAs. For de facto relationships, the couple must have lived together on a genuine domestic basis, though no minimum relationship length is required to create a BFA.

Legal effect and court orders

When properly executed, a BFA effectively removes the court’s power to make orders about financial matters covered in the agreement. This means the terms you’ve agreed to will generally prevail over what a court might otherwise decide.

Key legal requirements for a valid BFA

Full and frank financial disclosure

Both parties must provide complete information about their financial situation. This typically includes details of:

• Bank accounts and investments
• Property and real estate holdings
• Superannuation balances
• Business interests and valuations
• Debts and liabilities
• Expected inheritances or gifts

Independent legal advice

Each party must receive independent legal advice about the agreement’s effect on their rights and the advantages and disadvantages of entering into it. Lawyers must provide certificates confirming they’ve given this advice.

“A properly drafted BFA provides certainty and peace of mind for both parties, but this can only be achieved when each person has received thorough, independent legal advice about their rights and obligations.” – Eliza Legal

No undue pressure

The agreement must be entered into voluntarily, without coercion or duress. Courts look unfavourably on agreements presented too close to a wedding or major life event, as this may suggest pressure was applied.

Formal signing and witnessing

The agreement must be properly executed with signatures from both parties. While witnessing requirements vary, having the document properly witnessed adds an additional layer of protection against future challenges.

Benefits and limitations

Potential benefits

BFAs offer several advantages, including:

• Certainty about how assets will be divided
• Protection for business assets or family inheritances
• Reduced legal costs and emotional stress if separation occurs
• Privacy, as court proceedings are avoided
• Flexibility to create arrangements that suit your specific circumstances

Potential limitations

However, BFAs also have limitations:

They can be set aside by courts in certain circumstances, they may not adequately address future changes in circumstances, and they require upfront costs for proper legal advice and drafting. Additionally, they cannot make binding arrangements regarding children.

Common misunderstandings

Many people believe BFAs offer absolute protection in all circumstances, which isn’t true. They also don’t affect parenting arrangements, child support obligations, or automatically adjust for significant changes in circumstances without review.

How BFAs interact with Australian family law

Relevant provisions of the Family Law Act

Sections 90B-90KA of the Family Law Act govern BFAs for married couples, while sections 90UA-90UN cover de facto relationships. These provisions outline when agreements are binding and when courts can set them aside.

Common grounds for setting aside

Courts may invalidate BFAs if there was:

Fraud or non-disclosure of assets, duress or unconscionable conduct during negotiation, significant change in circumstances relating to children, or impracticality in enforcing the agreement due to changed circumstances.

Recent case examples

Australian courts have set aside BFAs where one party was pressured to sign just days before a wedding, where significant assets weren’t disclosed, or where the agreement was so one-sided it was deemed unconscionable.

Treatment of specialised assets

Superannuation, business interests, and trusts require special consideration in BFAs. These assets often need professional valuation and specific clauses to address their unique characteristics and tax implications.

Is a BFA right for you?

Situations where BFAs are useful

BFAs are particularly beneficial if you:

Have significant assets acquired before the relationship, own a business or professional practice, expect substantial inheritances, are entering a second marriage, or have financial responsibilities to children from previous relationships.

Questions to ask before deciding

Consider whether both parties are willing to fully disclose their finances, if you can afford proper legal advice, what specific assets you want to protect, and how you might feel about the agreement’s terms if circumstances change significantly.

Alternatives to consider

Other options include consent orders after separation (which require court approval), testamentary trusts as part of estate planning, or properly structured ownership arrangements for specific assets.

Cost vs benefit considerations

While BFAs typically cost between $3,000-$10,000+ depending on complexity, this investment may be justified when protecting significant assets or providing certainty about financial arrangements.

Step-by-step process for creating a BFA

The process typically involves gathering financial documents, consulting with a specialist family lawyer, negotiating terms, drafting the agreement, obtaining independent legal advice for each party, signing and certifying the document, and storing it securely.

Regular reviews (every 3-5 years or after major life events) are recommended to ensure the agreement remains relevant and appropriate.

Challenging or varying a BFA

If you believe a BFA should be challenged, seek immediate legal advice, preserve all relevant documents, and document any relevant communications. Applications to set aside or vary an agreement must typically be made within a reasonable time of becoming aware of the grounds for challenge.

Courts require substantial evidence to set aside an agreement, particularly regarding fraud, duress, or changed circumstances.

Final thoughts

Binding Financial Agreements offer a valuable tool for couples to plan their financial future with clarity and certainty. While they require careful consideration, proper disclosure, and expert legal advice, they can provide significant peace of mind and protection for both parties.

Whether you’re contemplating marriage, already married, or in a de facto relationship, understanding the role and requirements of BFAs helps you make informed decisions about protecting your financial interests. Eliza Legal can provide the specialised advice needed to create an agreement that properly reflects your circumstances and intentions, giving you confidence that your financial future is secure regardless of what lies ahead.