Separation and divorce are extremely stressful, emotional and complicated processes. When financial disputes are added to the equation, the situation can become even more challenging.
As experienced family lawyers in Perth, we have helped many couples draft a Binding Financial Agreement after separation. While these contracts are often made at the start of a relationship, they can be entered at any time to help streamline asset division.
This legal agreement allows you to establish clear, mutually agreed-upon terms regarding property settlement and/or spousal maintenance, helping to resolve crucial matters between former partners. It also protects against future claims by either party – all without the need for court intervention.
Here, we explain how a post-separation Binding Financial Agreement works, its potential advantages, legal requirements and other key considerations to factor in before you sign. Read on to discover whether this is the right way forward for your finances.
What is a Binding Financial Agreement?
A Binding Financial Agreement (BFA) is a contract between spouses that defines how their assets will be allocated in the event of separation or divorce. This financial agreement can be made before marriage or the commencement of a de facto relationship, during the relationship or after separation.
The term “binding” indicates that this agreement is legally enforceable, allowing the parties involved to settle property matters privately outside of court. As each relationship is unique, you will have the flexibility to tailor the terms to suit your specific circumstances as opposed to court rulings.
What can be covered in a Binding Financial Agreement after separation?
After separation, a Binding Financial Agreement can cover all financial matters, including real estate, investments, superannuation, inheritances, businesses, spousal maintenance and debts. It can even feature clauses that include or exclude certain assets obtained before entering the marriage or de facto relationship.
Following divorce or de facto relationship breakdown, your financial agreement can be used to address any of the following concerns:
- The distribution of any property acquired by either or both parties during the relationship;
- The management of financial resources accumulated by either or both parties throughout the relationship;
- Arrangements for the maintenance of either party; and
- Any additional matters related to the above issues.
Who can enter a Binding Financial Agreement after separation?
If you wish to enter a Binding Financial Agreement after separation, neither you nor your former partner are allowed to be a party to another contract of this kind at the same time.
Moreover, creating this contract is a complicated process that demands each party to seek independent legal counsel on whether its terms are in their best interests.
If you are considering this pathway, please contact our divorce lawyers in Perth. We are here to help you determine the most suitable course of action for your circumstances.
Benefits of entering a Binding Financial Agreement after separation
Endless litigation and mounting court fees can take a heavy toll, both emotionally and financially. A Binding Financial Agreement after separation offers a way to reclaim control over your circumstances.
Instead of enduring the drawn-out and expensive court process, you and your partner can craft a mutually agreed-upon and legally binding property settlement that reflects your own terms.
This approach is often not only more affordable but also far more efficient as it does not involve the Courts overseeing the said process, allowing you to move forward with greater peace of mind.
In summary, this contract can be beneficial post-separation because it:
- Enables both parties to negotiate terms that align with their specific needs and reach an agreement tailored to their unique situation.
- Offers the flexibility to settle matters outside the constraints of Family Law.
- Is often faster and more cost effective than pursuing a court settlement.
- Can foster a more amicable post-divorce relationship with your former partner through mutually agreed terms.
- Helps to prevent your former partner from making future claims.
Key factors to consider before you sign
It’s essential to consider the potential risks and challenges of entering a Binding Financial Agreement, which can vary depending on the unique dynamics of your relationship.
Some general drawbacks to keep in mind include:
- The Court does not oversee the creation of a BFA. Unlike other legal processes, BFAs are not registered with the Court, which only becomes involved if a dispute arises and a party contests the terms of the agreement.
- As mentioned above, both parties are required to seek independent legal advice to fully understand the terms and implications of the BFA. While this is a safeguard to ensure informed decisions, it can also spark disagreements – especially if one party is advised against signing.
- The legal landscape surrounding BFAs can be complex, for example when it comes to scenarios in which a Court might set aside the agreement.
The legal requirements for a Binding Financial Agreement
To ensure your Binding Financial Agreement is legally enforceable under the Family Law Act 1975 (Cth), the below requirements must be met:
- The agreement must be in writing;
- Each party must obtain independent legal advice about the implications, advantages, and disadvantages of entering the agreement before signing it;
- Both parties must provide a signed statement from your lawyers verifying that this legal advice has been obtained before signing the agreement;
- A copy of this signed statement must be provided to the other party or their lawyer;
- Both parties must sign the agreement; and
- The agreement must not have been terminated by either party or set aside by the Court.
Additionally, you must honestly disclose all assets. If the Court discovers that a party has acted fraudulently, hidden an asset or intentionally misvalued it, the Binding Financial Agreement may be set aside.
Failure to meet any of these requirements could jeopardise your contract’s enforceability. In other words, the agreement may not prevent either party from seeking a court order for property settlement or spousal maintenance.
Can you terminate a Binding Financial Agreement entered into after separation?
Yes. A Binding Financial Agreement entered into after separation can be terminated through a written termination agreement between the parties.
For this termination agreement to be legally effective, it must satisfy the same conditions required for creating the original BFA:
- Both parties must sign the termination agreement;
- Before signing, each party must obtain independent legal advice about the consequences of ending the BFA;Each party must receive a
- signed statement from their legal advisor, confirming that they have received the necessary legal advice;
- A copy of this signed statement must be delivered to the other party or their legal representative; and
- The Court must not set aside the termination agreement.
A BFA can also be terminated if both parties decide to enter a new BFA, so long as this new agreement includes a clause that explicitly terminates the previous one.
Can a Binding Financial Agreement made after separation be set aside?
Under the Family Law Act 1975 (Cth), there are specific situations in which a Binding Financial Agreement made after separation can be set aside:
- The agreement is deemed void, voidable, or otherwise unenforceable;
- The agreement was entered into under fraudulent means, such as failure to disclose relevant assets;
- A party entered into the agreement with the intent to defraud or defeat creditors, or with reckless disregard for the interests of their creditors;
- It is impractical to enforce the agreement’s terms;
- There are complications concerning superannuation; or
- A significant change in circumstances since the agreement was made deems it unsuitable, for instance in the care or welfare of a child.
Is it preferable to enter a Binding Financial Agreement before separation?
Yes. While no one begins a marriage or relationship anticipating its potential end, establishing a Binding Financial Agreement as early as possible can give you peace of mind that your assets will be divided according to mutually agreed terms if you were to separate.
After separation, there may be tension and conflict between you and your former partner. Having a Binding Financial Agreement in place before marriage can help prevent disputes over financial matters during this already difficult time.
Moreover, a property settlement application must be submitted within two years of separation for de facto couples, or within 12 months after the divorce is finalised for married couples. Therefore, if you’re planning to enter a Binding Financial Agreement that affects this process, it’s important to do so as soon as possible.
Overall, taking a proactive approach can lead to a less stressful separation process and foster a more amicable relationship into the future.
That said, it’s not too late to enter a Binding Financial Agreement after separation. At Affinitas Legal, we can help you draft a fair contract with minimal hassle so that you can focus on starting the next chapter.
Receive personalised legal support with your Binding Financial Agreement after separation
Choosing to enter into a Binding Financial Agreement after separation can be a powerful way to take control of your financial future and foster a smoother, more amicable separation during what can be an emotionally taxing time.
However, while BFAs can offer significant benefits, they aren’t a one-size-fits-all solution and do come with their own set of risks. These binding legal documents demand meticulous attention to detail and professional care.
That’s why it’s strongly recommended that you enlist a trusted Family Law solicitor to guide you through the process.
At Affinitas Legal, we will ensure you understand the full scope of what you’re agreeing to, including the potential pros and cons of the arrangement you’re about to make.
Our dedicated team is ready to help you with every stage of your Binding Financial Agreement in Perth. Please get in touch today for tailored support.
