A Binding Financial Agreement (BFA) is a practical approach to allow couples in Australia to pre-determine what will happen to their money and assets if they ever separate or divorce. Whilst a BFA can provide more flexibility to couples as to how their assets, they are also complicated documents which can be challenged and in some circumstances can be set aside by the Federal Circuit and Family Court of Australia.
At Unified Lawyers we'd like to help you factor in the most essential items related to a BFA, so you are be able to consider your BFA action plan with the help of our experienced lawyers to support you.
What is a Binding Financial Agreement (BFA)?
A Binding Financial Agreement, or BFA, refers to a binding agreement in which couples can make particular financial decisions regarding their property, assets, liabilities, and financial resources if an event such as a separation, divorce, or dissolution of a de facto partnership occurs.
A BFA is intended to provide transparency and certainty to both parties, which will protect their unique financial interests.
To be effective, a BFA must comply with some legal requirements:
- It has to be voluntary.
- Both parties must exchange full and frank financial disclosure.
- Both parties must recieve independent legal advice prior to entering into the BFA
A BFA can be entered into before, during, or after a relationship. They are used to set out arrangements like the financial aspects of the property division, spousal maintenance, and superannuation.
Why You Might Need a BFA?
A couple may consider the following if you are seeking the need of a BFA, for the reasons outlined below:
Asset Protection:
A Binding Financial Agreement (BFA) can protect any individual asset that was acquired before the relationship, ensuring that these assets remain with the original owner.
For example, if you purchased a house or a car before entering the relationship, a BFA can legally document that these assets are your sole property.
This is important because, without such documentation, these assets might be considered joint property in the event of a separation or divorce, leading to potential disputes and claims from your partner.
By having a BFA, you can avoid these complications, providing clarity and security for both parties, and ensuring that your pre-relationship assets are safeguarded.
Clarity and Certainty:
By setting out financial arrangements in advance through a BFA, you can reduce uncertainty and potential disputes in separation.
For example, if a couple had made provisions for the division or sharing of their assets well before entering into any kind of relationship, it could have saved them many disagreements and confusion in parting ways.
Spousal Maintenance:
Spousal maintenance can be included in a BFA agreement, where an individual can be granted financial support by their partner under the BFA if, for instance, full-time guardianship is taken care of by one of the partners while the other is working.
The agreement can guarantee maintenance to the individual sustaining him or herself financially in case of a breakup.
Superannuation:
BFAs can provide for how superannuation is to be divided. Superannuation usually represents one of the significant assets in a long relationship.
For example, if one partner has a larger superannuation account, the agreement can stipulate how it will be distributed or maintained upon breakdown so that justice is done to both parties and there is certainty.
Avoiding Court:
The advantages of a BFA that is drafted correctly is that it can prevent lengthy processes and expensive litigations when there are explicit agreements on financial aspects.
For example, if a couple has a set agreement about the division of their assets, they can avoid lengthy court battles that involve legal fees and find a way to part amicably.
Our experienced professionals at Unified Lawyers can guide you in the right direction and can provide a legal framework to support you through the processes of drafting a contract.
What Is The Cost For A Binding Financial Agreement?
The price range can vary widely from AU$3,000 up to AU$20,000 or higher in Australia.
The cost of a BFA can be lower or vastly higher due to contingencies such as the complexity of the financial arrangements, the need for negotiations on those arrangements, and the legal fees charged by the practicing lawyers involved.
Factors Determining the Cost of a BFA| State | Cost Range |
|---|---|
| New South Wales (NSW) | $2,000 – $20,000+ |
| Victoria (VIC) | $1,000 – $20,000+ |
| Queensland (QLD) | $2,000 – $20,000+ |
| Western Australia (WA) | $3,500 – $10,000 |
| South Australia (SA) | $2,000 – $4,000 |
| Tasmania (TAS) | $2,000 – $5,000 |
| Australian Capital Territory (ACT) | $2,000 – $10,000+ |
| Northern Territory (NT) | $2,000 – $5,000 |
- Complexity of Financial Arrangements:
The more complex the financial arrangements, the higher the cost, due to the number of assets, liabilities, and financial resources to be considered.
For example, if a couple owns multiple properties, various investment accounts, and several loans, the process of detailing and agreeing on these can become very costly and time-consuming, requiring extensive professional assistance.
- Negotiations:
It is an expensive process if much time is spent negotiating an agreement.
For instance, if a couple spends several months trying to agree on the division of their assets and financial responsibilities, the costs can escalate due to prolonged legal consultations and mediation sessions.
- Legal Costs:
The fees of the lawyers involved can vary significantly. Very experienced family lawyers may be more expensive, due to specialisation. However, it is critical to get the right advice from a highly experienced family lawyer, for your BFA, as they can be challenged in the Federal Circuit and Family Court of Australia.
Hiring our family lawyers at Unified Lawyers can ensure you get the right advice for your BFA. We can provide customised support and talk you through the legal costs involved .
- Independent Legal Advice:
Independent legal advice should be received by both parties, which adds to the cost of the overall process. Each partner must consult their own lawyer to ensure their interests are protected, doubling the legal fees involved in drafting and finalising the BFA.
- Documentation and Disclosure:
Financial information preparation and disclosure can be onerous and expensive.
For example, gathering all necessary financial documents, such as bank statements, property deeds, and investment records, requires significant time and effort, often involving additional costs for financial advisors or accountants to assist in compiling accurate and comprehensive disclosures.
Things to Consider for a Binding Financial Agreement
A standard BFA will allow for a comprehensive inventory of all assets, liabilities, and financial resources. Here is an outline of what you might expect to see covered:
- Real Estate: Properties owned by an individual or co-owned.
- Bank Accounts: Savings, checking, and other bank accounts.
- Investments: Stocks, bonds, mutual funds, and other investments.
- Superannuation: Retirement savings and superannuation accounts.
- Business Interests: Ownership interests in businesses or partnerships.
- Personal Property: Includes vehicles, jewellery, art, and many other valuable personal items.
- Debts and Liabilities: Mortgages, outstanding loans, credit card debts, and other liabilities.
- Spousal Maintenance: Provisions to give one financial support.
- Future Inheritances: Those which are a possibility in the future but cannot be taken into account.
Tips on How You Can Reduce the Cost of a BFA
While earning a BFA is indeed costly, there are ways to cut costs:
- Clear Communication: Open and transparent communication between parties can avoid the process of a lengthy negotiations.
- Choose the Right Lawyer: Engage our experienced lawyers at Unified Lawyers who specialise in family law and BFAs.
- Prepare Documentation: Get your financial documentation together and organised ahead of time. This can be a time-saving and cost-cutting benefit in legal expenses.
Can You Challenge a Binding Financial Agreement in Court?
Yes, a BFA can be challenged in court for the following reasons under Australian law:
- Misrepresentation: If one party has made false or misleading information to the other, including a failure to provide full and frank financial disclosure.
- Change in Circumstances: Something significant has happened to make the BFA unfair.
- Ambiguity: If the terms of a BFA are vague or uncertain.
- Unconscionable Conduct: If one of the parties was acting in a manner considered oppressive or unfair.
- Failure to Meet Legal Requirements: If the BFA had not met the necessary legal requirements, for example, independent legal advice.
For a more detailed understanding of how to review a BFA, you may want to use this article resource: Can a BFA Be Overturned
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.