BINDING FINANCIAL AGREEMENTS
LAWYERS PERTH
Enter Into A BFA To Legally Divide Your Finances After Separation, While Keeping It Out-Of-Court
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What Is A BFA?
A binding financial agreement, or BFA, is essentially a written agreement to determine how you and your ex-partner will divide your assets upon separation. Both married couples and those in a de-facto relationship can enter into a BFA.
If you are separated or divorced with no prior BFAs, you can sign a BFA to legally divide all your assets and debts.
In order for your BFA to be legally binding, both parties need to obtain independent legal advice, which is usually confirmed in a letter. This letter sets out the advantages and disadvantages of entering into the BFA, and its effects on your legal rights. Each party’s lawyer also needs to sign a certificate of independent legal advice, which must be attached to the back of the BFA.
The main benefit with a BFA, compared to consent orders, is that a BFA doesn't get approved by the court - it’s kept out of court entirely. Unlike consent orders, which must be reviewed by the court. The court only ever gets involved over disagreements with a BFA (but it’s not involved to make it legally binding).
Skip the queue! Since BFAs do not go through the court system, it allows the process to be over much quicker.
If you haven't separated, then you need a BFA before separation (often called a prenuptial agreement or “prenup”).
Types Of BFAs
There are 2 types of binding financial agreements: either before separation or after separation.
Before You Separate
You and your partner sign a BFA to determine how you split your assets and debts before you separate.
This means the BFA is signed either before you start your relationship (e.g. before marriage or before you move in together) or while you are in a relationship (e.g. after marriage or after you’ve become a de facto couple).
The BFA in this circumstance is used as an asset-protection mechanism.
You can protect your partner from having access to your house, inheritance, business interest, investments and any other assets you bring into the relationship.
After You Separate
If you and your partner have separated, you can enter into a BFA to decide how your assets and debts will be split between you both.
This is an alternative to consent orders.
You list all the assets you currently have and who will be getting what.
A BFA in this circumstance is used to legally divide the assets of the relationship and finalise all financial matters for good - so you can both move on with life.
The Process
- 1
You Reach An Agreement
The first, most important step is to have a finalised agreement between you and your partner. What will you split? Who will keep what? Both parties should freely agree to the proposed split without influence, pressure, fraud, or bad conduct etc.
- 2
We Prepare The BFA
Next, your agreement gets drafted by our expert family lawyers. This draft BFA outlines your agreement, with specifics to cover everything.
- 3
Your Partner Reviews It
Once drafted, your partner gets their own independent legal advice on the document. It’s compulsory for you both to get your own independent legal advice.
- 4
BFA Signed
The BFA is then signed by both parties, and their lawyers.
- 5
BFA Is Binding
Finally, the BFA comes into effect, with both parties obligated to action whatever is enforced/set out in the agreement. This often is the quickest route to a legally binding agreement and avoids extensive court control.
What Does BFA Cover?
BFAs cover financial assets and debts like money in bank accounts, vehicles, stocks and investments, and superannuation. The most important asset, often the family home, is one of the key features in the BFA. They can also deal with spousal maintenance (including preventing spousal maintenance from being claimed).
BFAs can’t cover parenting-related matters or child support.
What Is The Difference Between Consent Orders And A Binding Financial Agreement?
Consent orders and BFAs are the two options separating couples have for making their property and financial agreement legally binding. There are substantial differences between the two.
- 1
What can be included?
Consent orders can include arrangements for your children, whereas BFAs are for the purpose of property and financial matters only. - 2
When can they be made?
Consent orders can only be made after separation. BFAs can be entered into before, during or after a marriage or de facto relationship. - 3
Legal advice
It is not compulsory to receive legal advice for consent orders, though it is recommended.
It is, however, a strict requirement for both parties when entering into a BFA. A BFA is not valid if either party has failed to obtain independent legal advice. As the Court is not involved, the legal advice is there as a safeguard to make sure each person understands what they're entering into, and aren't bullied into signing one-sided or unfair agreements without having the full knowledge of what they're actually entering into. - 4
No Court Review
Consent orders are lodged with the Family Court of WA, which will then determine whether the proposed property and financial orders are just and equitable (eg a check to see if anyone is substantially disadvantaged). BFAs, on the other hand, are not lodged at the Family Court at all. - 5
BFA are quicker
A BFA can work out quicker in terms of from start to finish, compared to consent orders. Sometimes court timeframes and listing times can be three or four weeks from the date of lodgment, whereas with a binding financial agreement you're not subjected to those sorts of timeframes or delays with the court.
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Are There Any Circumstances In Which A Financial Agreement Might Be Deemed Invalid?
There are limited situations in which this might happen. This may include things like:
- 1
Fraud
The agreement was made fraudulently, for example if there was material non-disclosure of assets.
- 2
Duress
This means being forced into doing something. This does not mean that the other party literally has to force your pen to paper, but rather that there are circumstances in which a party has felt bullied or pressured into signing.
- 3
Unconscionability
The agreement was made unconscionably. This means that one party used their position of power to make the other sign the binding financial agreement, to the extent that it may not be deemed to have been made under their own free will.
- 4
Hardship Due To Care For Children
There is also the potential for the BFA to be set aside as a result of a material change of circumstances in relation to the care, welfare and development of a child of the relationship who is under 18, and hardship would be caused. To show hardship, a person needs to show that the expenses in relation to the child have increased compared to the period when the BFA was signed. Further, any decision in relation to setting aside the BFA is discretionary, meaning even if a material change of circumstances and hardship are proved, the Court may still not exercise their power to set aside the BFA. This only applies while the child is under 18 years.
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Benefits Of A BFA
Specificity of terms, so you have more certainty in the outcomes of the agreement.
Save time as you don't have to go through long court process.
Courts are unlikely to get involved because of an unfair deal to one person.
If both parties are happy, there’s no further interference.
Resolve quicker and move on.
Stamp duty and other possible exemptions on property transfer etc.
Can be customised to unique or complex arrangements.
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