Binding financial agreements (BFAs) allow couples to establish clear financial arrangements and safeguard their assets, whether entered into before, during, or after marriage.
This article will explore at what stage of the relationship BFAs must be signed, and their implications for couples.
The Timing of Creating a Binding Financial Agreement
The timing of signing a binding financial agreement is flexible under Australian law. Contrary to popular belief, BFAs do not necessarily have to be signed before marriage. The Family Law Act permits couples to enter into these agreements at three stages:
- Before marriage: Often referred to as a “prenuptial agreement”, this type of BFA is signed to protect pre-existing assets and financial arrangements.
- During marriage: Couples can also create a BFA after they have tied the knot. These agreements are typically referred to as “postnuptial agreements.”
- After separation or divorce: BFAs can also be signed to finalise financial arrangements when a marriage ends.
The key requirement, regardless at what point in the relationship it is made, is that the agreement complies with the legal formalities outlined in the Family Law Act to ensure the BFA is enforceable.
Benefits of Signing a Binding Financial Agreement Before Marriage
While BFAs are not required to be signed before marriage, many couples choose to do so for several reasons:
1. Protecting Pre-Marital Assets
A pre-marital BFA allows individuals to safeguard assets they have acquired before entering into the marriage. These may include:
- Property, such as real estate or investments.
- Family inheritances or heirlooms.
- Business interests or partnerships.
- Superannuation entitlements.
This protection ensures that, in the event of separation, these assets remain with their original owner and are not subject to division under family law.
2. Reducing Financial Disputes
By clearly outlining financial arrangements before marriage, couples can reduce the likelihood of disputes if the relationship ends. A BFA provides clarity and certainty about how assets will be divided, saving time, money, and emotional stress.
3. Customising Financial Arrangements
BFAs offer the flexibility to create personalised agreements tailored to the unique needs of both parties. For example, the agreement can:
- Address debt responsibilities.
- Outline provisions for children from previous relationships.
- Specify how future assets, such as joint investments, will be handled.
How Binding Financial Agreements Work During or After Marriage
Making a BFA During Marriage
Creating a binding financial agreement during marriage, also known as a postnuptial agreement, can be an effective way to clarify financial arrangements after significant life events or changes in financial circumstances. For instance:
- If one partner receives an inheritance, they may want to ensure it remains protected as their separate asset.
- A couple might decide to outline how new assets acquired during the marriage, such as joint investments or real estate, will be divided in the event of separation.
- If one party starts a business, they can safeguard its future by specifying ownership and profit distribution.
During marriage, both partners must willingly enter into the agreement and meet the legal requirements, including obtaining independent legal advice. A well-crafted postnuptial BFA provides peace of mind and can prevent misunderstandings about financial responsibilities later in the relationship.
Making a BFA After Marriage Ends
BFAs can also be made after separation or divorce to finalise financial matters. These agreements can:
- Outline the division of property and assets, ensuring clarity and avoiding lengthy court battles.
- Specify arrangements for spousal maintenance or ongoing financial support.
- Provide a clear roadmap for settling liabilities, such as joint debts or mortgages.
A post-separation BFA is often quicker and less stressful than relying on the courts to decide financial disputes. However, both parties must ensure the agreement is fair and complies with legal formalities to make it enforceable.
Are BFAs Made During or After Marriage Weaker or More Prone to Being Overturned Than Ones Made Before?
Binding financial agreements made during or after marriage are not inherently weaker or more prone to being overturned than those made before marriage. However, there are specific considerations that may impact their enforceability:
1. Timing and Context of the Agreement
When a BFA is created during or after marriage, it may be subject to greater scrutiny if there is evidence of:
- Significant power imbalances between the parties.
- Situations where one party may feel pressured or coerced into signing due to the emotional or financial dynamics of the marriage.
Ensuring that both parties willingly and independently agree to the terms is crucial to avoiding potential challenges.
2. Full Financial Disclosure
Regardless of when a BFA is signed, the court requires full financial disclosure from both parties. If it can be proven that one party withheld critical financial information when drafting a postnuptial or post-separation BFA, this could weaken the agreement’s validity.
3. Legal Advice and Documentation
As with prenuptial agreements, BFAs made during or after marriage must comply with all formal legal requirements under the Family Law Act 1975. Independent legal advice for each party is essential to demonstrate that the agreement was entered into knowingly and voluntarily.
4. Perception of Fairness
Agreements made during or after marriage are often created in response to specific events, such as a change in financial circumstances or a relationship breakdown. Courts may examine whether the terms of the agreement were fair and equitable at the time they were made. Terms perceived as heavily favouring one party may be more vulnerable to challenges.
5. Maintaining the Agreement’s Relevance
A BFA’s enforceability depends on its relevance over time. Agreements made during or after marriage may need to be updated to reflect changes such as new assets, debts, or the birth of children. Regularly reviewing and revising the BFA ensures it remains applicable and enforceable.
Need Help With Binding Financial Agreements?
As binding financial agreement lawyers in Australia, my law firm can help you navigate the complexities of drafting and signing a binding financial agreement. Whether you need assistance before, during, or after marriage, our team ensures your rights and interests are protected. Contact us today by calling 1300 529 888.