Many people are dissuaded from getting a lawyer to draft a binding financial agreement due to the cost, and instead turn to trying to make one themselves in order to save some money.
However, there are many factors to consider when it comes to making a BFA, and whether the agreement will be legally valid and enforceable when the time comes to use it.
In this article, we will go into the details of whether you can draft a legally valid BFA in Australia by yourself, and what you need to know.
Can You Do Your Own Binding Financial Agreement?
Technically, it is possible to draft your own binding financial agreement without a lawyer.
The idea of creating your own agreement might seem appealing, particularly if you want to save on legal fees. There are even templates available online that claim to guide you through the process.
However, while you might be able to put pen to paper and draft an agreement, there are significant limitations and potential consequences to consider.
Important Aspects to Consider
A binding financial agreement requires strict adherence to specific legal standards outlined in the Australian Family Law Act 1975. To be legally binding, the agreement must meet stringent requirements, such as detailing all assets clearly, ensuring both parties have entered into the agreement freely, and without any undue pressure. If these elements are not satisfied, your DIY agreement can easily be challenged or rendered invalid in court.
Another key legal requirement is that both parties must receive independent legal advice before signing a binding financial agreement. This is crucial to ensure that both understand the consequences of the agreement they are entering into. Therefore, even if you draft the BFA on your own, it will not be valid unless each party has received independent legal advice.
Additionally, navigating the complexities of financial assets, future inheritances, superannuation, and tax implications often requires the expertise of a professional. Without a thorough understanding of these elements, any binding financial agreement drafted without legal assistance could lead to future disputes and unexpected financial losses.
The Risks of DIY Binding Financial Agreements
While the do-it-yourself route may seem tempting, there are substantial risks involved. One of the biggest risks is that an improperly drafted agreement may not hold up in court. In Australia, the Family Court has the authority to set aside BFAs if they do not meet the required legal criteria.
Consider, for instance, if one party argues that they did not understand the implications of the agreement due to lack of legal advice. The Family Court could declare the BFA invalid.
Furthermore, if your circumstances change significantly—such as changes in health, income, or family dynamics—a poorly drafted agreement might not adequately account for these changes, resulting in a less favourable outcome for one or both parties.
There is also the issue of emotional bias. When drafting your own agreement, it is challenging to remain completely objective about financial matters.
Legal professionals provide a neutral perspective, ensuring that the agreement is fair and covers all the necessary legal and financial aspects. Without this impartiality, you run the risk of drafting an unbalanced agreement that could later be disputed.
Legal Requirements for Binding Financial Agreements in Australia
Under Australian law, binding financial agreements must comply with strict requirements to be enforceable. The Family Law Act 1975 stipulates that:
- Independent Legal Advice: Both parties must receive independent legal advice on the advantages and disadvantages of the agreement.
- Full Disclosure: Both parties must fully disclose all assets, liabilities, and financial resources. Failing to disclose relevant financial information can lead to the agreement being set aside by the court.
- Written Document: The BFA must be in writing and signed by both parties.
- Certificate of Independent Legal Advice: The legal representatives for both parties must sign a statement confirming that legal advice was provided.
If any of these requirements are not met, the BFA is at risk of being declared void. This means that any agreement drafted without the involvement of a lawyer may not stand up if contested, potentially leaving you vulnerable.
Additional Considerations for Drafting a BFA
If you still wish to proceed with drafting your own binding financial agreement, there are a few important things to keep in mind:
- Templates vs. Personalisation: Online templates might not cover the specific details of your financial situation. Every relationship and financial circumstance is different, and a generic template might miss critical aspects of your personal finances.
- Superannuation: Superannuation is often a significant asset in a relationship, and its treatment in a BFA requires a thorough understanding of the relevant laws. Without proper legal guidance, you may overlook complex rules about superannuation splitting.
- Tax Implications: The distribution of certain assets might have tax consequences. A lawyer can help you understand any potential tax liabilities that could arise from the agreement.
- Future Changes: A well-drafted BFA will account for future changes, such as new children, changes in employment, or other life events. Without a lawyer, it is easy to overlook these future contingencies, leading to an agreement that may not protect your interests as circumstances evolve.
Why Seeking Legal Help is Worth It
While drafting your own binding financial agreement might seem like a cost-effective solution, the benefits of professional legal assistance far outweigh the risks. A binding financial agreement that is professionally drafted and legally sound can provide peace of mind for both parties, ensuring that financial matters are settled clearly and effectively.
Lawyers specialising in BFAs, such as those at my law firm, understand the nuances of Australian family law and can ensure that the agreement is tailored to your unique situation. By seeking professional help, you can avoid the pitfalls of a DIY approach, mitigate the risk of future disputes, and ensure that the agreement is enforceable in court.
Legal professionals also help to facilitate open communication between both parties. This can prevent misunderstandings and create a fair and balanced agreement that protects everyone’s interests, which is especially important when dealing with significant assets or complex financial situations.
Need Help with a Binding Financial Agreement?
Creating a binding financial agreement is not just about putting terms in writing; it’s about ensuring your future financial security is legally protected.
At my law firm, we specialise in helping individuals and couples draft legally sound and enforceable binding financial agreements at fixed fee costs to make it affordable. Our experienced team can guide you through the process, ensuring all legal requirements are met and that your agreement will stand the test of time.
For expert assistance in creating a binding financial agreement that protects your interests, contact us today by calling 1300 529 888.