Binding Financial Agreements
What is a Binding Financial Agreement?
A Binding Financial Agreement (BFA) is a legally enforceable agreement that allows couples to decide how their property, financial resources and, in some cases, spousal maintenance will be dealt with if their relationship ends. A BFA can be entered into before, during or after a marriage or de facto relationship, providing certainty and helping to minimise future disputes.
1. What is a Binding Financial Agreement?A Binding Financial Agreement should be entered into freely and voluntarily by both parties. It is designed to reflect your individual circumstances and the arrangements you both consider to be fair. When properly prepared, a BFA can provide peace of mind by setting clear expectations and reducing the likelihood of costly and stressful litigation in the future.
2. A Voluntary Agreement That Reflects Your CircumstancesFor a Binding Financial Agreement to be effective, each party should provide full and honest disclosure of their financial circumstances. Both parties must also obtain independent legal advice before signing the agreement. These safeguards help ensure that each person understands their rights, the effect of the agreement, and the advantages and disadvantages of entering into it, reducing the risk of the agreement being challenged later.
3. Full Financial Disclosure and Independent Legal AdviceWhat is the Process?
Agree on the Terms and Exchange Financial Disclosure
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The process begins with both parties voluntarily agreeing on the proposed terms of the Binding Financial Agreement. Each party should also provide full and honest disclosure of their financial circumstances, including their assets, liabilities, income, financial resources and any other relevant information. Complete financial disclosure is essential to ensuring the agreement is fair, informed and less susceptible to future challenge.
Preparation of the Agreement
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Once the terms have been agreed, one party will usually engage their solicitor to prepare the first draft of the Binding Financial Agreement. The draft is then provided to the other party and their solicitor for review. It is common for the agreement to undergo amendments and negotiation to ensure it accurately reflects the parties' intentions and adequately protects both parties' interests.
Independent Legal Advice
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Before the agreement can become legally binding, each party must obtain independent legal advice from their own solicitor. This advice explains the effect of the agreement on their rights and the advantages and disadvantages of entering into it. Following this advice, the parties may choose to proceed, negotiate further amendments, or decide not to enter into the agreement.
Signing the Agreement
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Once both parties are satisfied with the terms and have received independent legal advice, the Binding Financial Agreement is signed by both parties. Their respective solicitors also provide the required certificates confirming that independent legal advice has been given. Once executed, the agreement becomes legally binding and provides certainty regarding the financial arrangements it covers.