A binding financial agreement (BFA) is a crucial legal document for couples in Australia, whether you’re entering into a relationship, managing finances during the relationship, or preparing for separation. Knowing what to include ensures your agreement is legally enforceable and meets your specific needs.
This article covers the key elements to include in your BFA to protect your interests and secure your financial future.
Key Components to Include In a Binding Financial Agreement
1. Identification of Parties
The agreement must clearly identify the individuals involved. This includes full legal names, addresses, and other identifying details to ensure there is no ambiguity about who the agreement pertains to.
2. Acknowledgement of Independent Legal Advice
Australian law requires both parties to obtain independent legal advice before signing a BFA. The agreement should include a clause confirming that each party has received advice about:
- The effect of the agreement on their rights.
- Whether the agreement is in their best interests.
Without this clause, the agreement may be deemed invalid.
3. Financial Disclosures
Transparency is essential for a binding financial agreement. Both parties must fully disclose their financial circumstances, including:
- Income sources and amounts.
- Assets, such as properties, investments, and superannuation.
- Liabilities, including debts and ongoing financial obligations.
Failure to provide full disclosure can lead to the BFA being set aside by the court [link to article about setting aside/overturning BFA].
4. Division of Assets and Liabilities
The agreement must specify how assets and liabilities will be divided between the parties. This can include:
- Ownership of property.
- Division of savings and investments.
- Allocation of debts, such as mortgages or loans.
Clear and detailed descriptions of the division are necessary to prevent disputes in the future.
5. Financial Support Arrangements
If one party is to provide financial support to the other, this must be clearly outlined. This section should cover:
- The amount of support.
- The duration of payments.
- Any conditions that may affect financial support, such as re-marriage or changes in income.
6. Superannuation Agreements
Superannuation is treated as a significant asset in Australia. The agreement should outline:
- How superannuation entitlements will be split.
- Any arrangements for ongoing contributions or withdrawals.
Specific terms ensure that both parties’ retirement savings are protected and fairly allocated.
7. Provisions for Children
While BFAs cannot determine parenting arrangements, they can address financial responsibilities for children. This might include:
- Ongoing child support payments.
- Covering education or medical expenses.
These terms help clarify financial obligations for the children’s benefit.
8. Termination and Review Clauses
Including a termination or review clause can help address significant changes in circumstances. For example:
- The agreement may specify conditions for its termination, such as marriage or the birth of a child.
- Periodic reviews can ensure the agreement remains relevant and enforceable over time.
Additional Relevant Information About Binding Financial Agreements
Legal Requirements for BFAs in Australia
To ensure a binding financial agreement is legally enforceable, it must comply with the requirements set out under the Family Law Act 1975. This includes:
- Being in writing.
- Signed by both parties.
- Both parties obtaining independent legal advice.
- Inclusion of signed statements from the lawyers advising each party.
Types of Binding Financial Agreements
BFAs can be tailored to different stages of a relationship:
- Pre-nuptial Agreements (before marriage): Protect assets acquired before the relationship.
- Cohabitation Agreements (during the relationship): Manage finances while living together.
- Separation Agreements (after separation): Outline the division of assets and liabilities post-separation.
Common Pitfalls to Avoid
When drafting a BFA, avoid these common mistakes:
- Incomplete Financial Disclosure: Ensure all assets and liabilities are disclosed.
- Ambiguous Language: Use precise and clear terms to avoid misinterpretation.
- Failure to Update: Review and update the agreement when significant life changes occur.
Need Help Drafting a Binding Financial Agreement?
As binding financial agreement lawyers in Australia, my law firm can guide you through the process to ensure your agreement is legally binding and tailored to your needs.
Contact our experienced team today on 1300 529 888.