A binding financial agreement (BFA) is not a document you sign once and forget about. Life changes, circumstances shift, and what made sense when you first created your agreement may no longer reflect your current situation or protect your interests adequately. Whether you entered into a BFA before marriage, during your relationship, or after separation, regularly reviewing this important legal document ensures it continues to serve its intended purpose. This article explains how to review an existing BFA, identifies the key signs that indicate when an update or complete replacement is necessary, and outlines the practical steps involved in making changes to your agreement.
Signs Your BFA May Need a Review
Significant Changes to Your Financial Position
One of the most common triggers for reviewing a BFA is a substantial change in the financial circumstances of either party. When you originally signed your agreement, you and your partner likely had a particular asset base, income level, and set of liabilities. If either of you has since experienced a major financial shift, such as receiving an inheritance, starting a successful business, or acquiring significant property, your existing BFA may no longer accurately reflect the current financial landscape of your relationship. A BFA that was fair and reasonable at the time of signing can become lopsided or inadequate when financial circumstances change dramatically.
Similarly, negative financial changes can also warrant a review. If one party has accumulated substantial debt, experienced business failure, or suffered a significant loss of income due to illness or redundancy, these changes may affect how assets and liabilities should be divided. The original terms of your BFA might not account for these new realities, potentially leaving one party in an unfair position. Reviewing your agreement in light of these changes allows you to assess whether modifications are needed to maintain fairness and practicality.
Major Life Events
Life events beyond financial changes can also signal the need for a BFA review. The birth or adoption of children is a particularly significant event that often requires updates to a financial agreement. Your original BFA may not have contemplated children, or it may have been drafted with different assumptions about parenting arrangements and financial responsibilities. As your family grows, ensuring your BFA addresses matters relevant to children, such as the family home and financial provisions, becomes increasingly important.
Other major life events that may necessitate a review include serious illness or disability affecting either party, career changes that significantly alter earning capacity, retirement or approaching retirement age, and relocation to a different state or country. Each of these events can fundamentally change the assumptions underlying your original agreement. A BFA drafted when both parties were young professionals with similar earning potential may look very different from what would be appropriate when one party has become a full-time carer or when both parties are approaching retirement with different superannuation balances.
Changes in the Law
Australian family law is subject to change, and amendments to legislation or significant court decisions can affect the validity or interpretation of existing BFAs. If your agreement was drafted several years ago, there may have been legal developments that impact how your BFA would be treated by a court. Reviewing your agreement with a current understanding of the legal landscape ensures you are aware of any potential vulnerabilities or issues that may have arisen due to changes in the law.
Courts have, over time, set aside BFAs for various reasons including procedural defects, failure to provide proper disclosure, or where enforcement would be unjust. Understanding how recent case law might affect your agreement is an important part of the review process. A BFA that was properly drafted at the time may now contain provisions or procedural elements that are viewed differently under current legal standards.
How to Conduct a Thorough Review of Your BFA
Locate and Re-Read Your Original Agreement
The first step in reviewing your BFA is to locate your original signed agreement and any associated documents. This includes the certificates of independent legal advice that both parties should have received at the time of signing. Take the time to read through the entire agreement carefully, noting any provisions that you do not fully understand or that no longer seem to reflect your current circumstances. Pay particular attention to how assets and liabilities are defined and categorised, what happens to property acquired after the agreement was signed, and how the agreement deals with changes in circumstances.
As you review, make a list of questions or concerns that arise. Consider whether the asset schedule attached to the agreement still accurately reflects what each party brought into the relationship and what has been acquired since. Note any provisions that seem unclear, outdated, or potentially unfair given current circumstances. This initial review provides the foundation for more detailed analysis and discussion with your legal adviser.
Assess Current Financial Circumstances
A comprehensive review requires an up-to-date understanding of both parties’ financial positions. Gather current information about all assets, including real estate, bank accounts, investments, superannuation, business interests, and valuable personal property. Also compile information about liabilities such as mortgages, loans, credit card debts, and any other financial obligations. Compare this current financial picture with what was recorded in your original BFA to identify significant changes.
Consider also any assets that may have been acquired jointly during the relationship and how these would be treated under your existing agreement. Some BFAs contain provisions about how jointly acquired assets will be divided, while others may be silent on this issue or contain provisions that no longer seem appropriate. Understanding the full financial picture allows you to assess whether your BFA still achieves its intended purpose of providing certainty and fairness in the event of separation.
Seek Independent Legal Advice
Reviewing a BFA is not something you should do entirely on your own. Engaging a family lawyer to review your agreement provides you with professional insight into whether your BFA remains legally sound and practically effective. A lawyer can identify any potential issues with your agreement, explain how changes in the law might affect its validity or interpretation, and advise you on whether updates or a complete replacement would be advisable in your circumstances.
It is important that each party obtains their own independent legal advice, just as was required when the original agreement was signed. This ensures both parties fully understand their rights and obligations and that any changes made to the agreement are done with informed consent. Your lawyer can also help you understand the practical implications of your BFA, such as what would actually happen if you and your partner were to separate under the current terms of the agreement.
When to Update an Existing BFA
Minor Changes and Amendments
In some cases, your existing BFA may require only minor updates rather than a complete replacement. If the fundamental structure and provisions of your agreement remain sound and fair, it may be possible to make amendments that address specific issues without starting from scratch. For example, you might need to update the schedule of assets to reflect current holdings, add provisions dealing with a specific new asset such as an inheritance or business interest, or clarify provisions that have become ambiguous over time.
Amendments to a BFA must comply with the same formal requirements as the original agreement. This means both parties must receive independent legal advice about the amendment, and certificates confirming this advice must be attached to the amended agreement. The amendment must be in writing and signed by both parties. Failing to follow these procedural requirements can render the amendment invalid, potentially affecting the validity of the entire agreement. Even for seemingly simple updates, professional legal assistance is strongly recommended to ensure all requirements are met.
Updating Asset Schedules
One of the most common updates to a BFA involves revising the schedules that detail each party’s assets and liabilities. Over time, the values recorded in these schedules can become significantly outdated, and new assets may have been acquired that are not mentioned at all. Updating these schedules ensures the agreement accurately reflects the current financial position of both parties, which is essential for the agreement to operate as intended.
When updating asset schedules, it is important to obtain current valuations for significant assets such as real estate and business interests. Bank statements, superannuation statements, and other financial documents should be gathered to provide an accurate snapshot of current holdings. Full and frank disclosure remains essential when updating a BFA, just as it was when the original agreement was drafted. Failure to disclose assets or providing inaccurate information can be grounds for a court to set aside the agreement.
When to Replace Your BFA Entirely
Fundamental Changes in Circumstances
There are situations where updating an existing BFA is not sufficient, and a completely new agreement is the better option. If your circumstances have changed so dramatically that the original agreement no longer reflects your current situation or intentions, starting fresh with a new BFA allows you to address all relevant matters comprehensively. This might be the case where the original agreement was drafted before children were born, where there have been massive changes in the relative wealth of the parties, or where the original agreement was drafted to address a specific situation that no longer applies.
A new agreement also provides the opportunity to take advantage of improved drafting techniques and to ensure compliance with current legal requirements. If your original BFA is many years old, it may contain provisions or use language that is now considered less than ideal. A new agreement drafted with current legal knowledge can provide greater certainty and be less vulnerable to challenge. On top of that, preparing a new agreement allows both parties to reconsider their intentions and ensure the agreement truly reflects their current wishes and circumstances.
Potential Validity Issues with the Original Agreement
If your review reveals potential issues with the validity of your original BFA, replacement may be necessary to ensure you have an enforceable agreement in place. Common validity concerns include inadequate disclosure of assets at the time the original agreement was signed, procedural defects in how independent legal advice was provided, provisions that may be considered unjust or unconscionable in current circumstances, and failure to comply with formal requirements under the Family Law Act 1975.
Rather than attempting to fix a potentially defective agreement through amendments, it may be cleaner and more effective to terminate the existing agreement and enter into a new one that complies with all current requirements. This approach removes any doubt about the validity of your agreement and ensures you have a document that will stand up to scrutiny if ever tested. A family lawyer can advise you on whether your existing agreement has any vulnerabilities and whether replacement is the recommended course of action.
Mutual Agreement to Start Fresh
Sometimes both parties simply agree that their original BFA no longer serves its purpose and that a fresh start is preferable. This might occur when the original agreement was drafted quickly or without full consideration of all relevant issues, when both parties’ views about fairness and appropriate division have evolved, or when the relationship has developed in ways not contemplated when the original agreement was signed. In these situations, both parties can agree to terminate the existing BFA and enter into a new agreement that better reflects their current intentions.
Terminating an existing BFA and replacing it with a new one requires careful attention to procedural requirements. The termination itself must be properly documented and must comply with legal requirements to be effective. Both parties should receive independent legal advice about both the termination and the new agreement. Working with experienced family lawyers ensures these processes are handled correctly and that the new agreement provides the protection both parties are seeking.
The Process of Updating or Replacing Your BFA
Initial Consultation and Assessment
The process typically begins with an initial consultation with a family lawyer who can review your existing agreement and discuss your current circumstances and concerns. During this consultation, you can explain what has changed since your original agreement was signed, what concerns you have about the current terms, and what outcomes you are hoping to achieve. Your lawyer can then provide initial advice on whether an update or replacement is recommended and outline the steps involved.
This is also an opportunity to discuss the costs involved and the likely timeframe for completing the process. Understanding what to expect helps you plan appropriately and ensures there are no surprises along the way. Your lawyer can explain the fixed fee structure for the work involved and provide clarity about what is included in that fee.
Disclosure and Negotiation
Whether you are updating or replacing your BFA, full financial disclosure is essential. Both parties must provide complete and accurate information about their assets, liabilities, income, and financial resources. This disclosure forms the foundation for any negotiations about the terms of the updated or new agreement. Without full disclosure, the resulting agreement may be vulnerable to challenge on the basis that one party did not have complete information when agreeing to its terms.
Negotiations about the terms of the updated or new agreement should be conducted in good faith, with both parties aiming for an outcome that is fair and workable. While each party should have their own interests in mind, an agreement that is grossly unfair to one party is more likely to be challenged and potentially set aside by a court. Working with lawyers who understand the importance of balance and fairness can help ensure the final agreement is one that both parties can live with and that will withstand scrutiny.
Drafting, Advice, and Execution
Once the terms have been agreed, the updated agreement or new BFA is drafted. This document must comply with all requirements under the Family Law Act 1975 to be binding. Before signing, each party must receive independent legal advice from their own lawyer about the effect of the agreement on their rights and the advantages and disadvantages of entering into the agreement. The lawyers must then provide signed statements confirming that this advice was given.
The final step is execution of the agreement, which involves both parties signing the document along with the required legal advice certificates. Once properly executed, the updated or new agreement becomes binding on both parties. Keeping the original signed agreement in a safe place and providing copies to both parties ensures everyone has access to the document if needed in future.
Practical Considerations for BFA Reviews
Timing Your Review
There is no set rule about how often you should review your BFA, but conducting a review at regular intervals or when significant events occur is good practice. Some couples choose to review their agreement every few years as a matter of course, while others wait until a specific trigger event prompts them to look at their agreement again. The key is not to assume that an agreement signed years ago still reflects your current situation and intentions without actually checking.
Reviewing your BFA proactively, rather than waiting until separation is imminent, allows changes to be made in a calm and considered environment. When separation is looming or has already occurred, negotiations about financial matters can become more contentious and difficult. Addressing any necessary updates while the relationship is stable provides a better foundation for fair and reasonable discussions about the terms of the agreement.
Costs and Value
There are costs associated with reviewing, updating, or replacing a BFA, including legal fees for obtaining advice and having documents drafted. However, these costs should be weighed against the value of having a properly functioning agreement in place. An outdated or potentially invalid BFA provides false comfort and may not achieve the protection you are counting on if separation occurs. Investing in a proper review and any necessary updates ensures your agreement is fit for purpose.
Understanding the costs upfront allows you to budget appropriately and make informed decisions about proceeding. A fixed fee approach to legal services provides certainty about what you will pay and avoids the stress of accumulating hourly charges. Discussing fees at the outset of the process ensures transparency and allows you to proceed with confidence.
Need Assistance Reviewing Your Binding Financial Agreement?
Regularly reviewing your BFA and making updates or replacements when circumstances change ensures your agreement continues to protect your interests and reflect your current situation. As binding financial agreement lawyers in Australia, my law firm can help you review your existing BFA, advise on whether updates or a new agreement are needed, and guide you through the process with transparent, fixed fee pricing. Contact our team today by calling 1300 529 888 to discuss your BFA review.