A Binding Financial Agreement (BFA) goes by many names – prenuptial agreement, postnuptial agreement and cohabitation agreement – but they are recognised by the Australian courts as Binding Financial Agreements.
A BFA allows a couple to agree in advance on a fair division of assets. Properly drafted and executed BFA’s can reduce the financial stress during a relationship breakdown or separation, allowing the couple to separate amicably without the need for costly, time-consuming and stressful court action.
Couples can enter into a BFA at the start of a relationship, before getting married, at any stage during their marriage or after separating.
A BFA can be used to specify how each party has agreed to divide their assets in the event of their relationship failing. They generally cover:
- Financial settlement
- Financial support (maintenance)
- Agreed arrangements for any children the couple may have
- Any incidental issues
Issues that commonly arise during a separation that are dealt with in the BFA usually include:
- Protecting existing assets and inheritances
- Ensuring that children of previous relationships receive inheritance
- Preserving family or other businesses for the future generation
- Providing more sway to the contribution of the higher income earner
- Avoiding disputes about finances at the end of a relationship
The benefits of a correctly executed BFA can be quite substantial. It can provide some degree of certainty to the parties involved and avoid unnecessary arguments. It can also make both parties feel secure knowing that any property or assets they accumulated before their relationship or marriage are safe.
However, it is important to note that a BFA can only provide significant comfort and certainty if carried out properly and reviewed from time to time.