By Teigan Hutchison
While Ye, the rapper formally known as Kanye West, may have coined the line in his classic hit “Gold Digger”, he unwittingly sparked a conversation about the contentious nature of pre- (and post) nuptial agreements.
Pre- and post-nuptial agreements – which are more commonly referred to as Binding Financial Agreements (BFAs) in the Australian family law jurisdiction – are a type of agreement between two parties, created before, during, or after a marriage or de facto relationship under the provisions of the Family Law Act 1975 (Cth). Its purpose is to deal with the parties’ property pool and assets, whether solely or jointly owned, in the event of a breakdown of a relationship.
Why Should my Partner and I enter into a BFA Agreement?
There are numerous advantages to entering into a BFA, including:
- Asset Protection: A BFA serves as a robust shield for individual assets, whether that includes inheritances, shareholdings, or family businesses. The parties can clearly define their financial rights and entitlements, safeguarding assets acquired before the relationship, and prevent any claim for those assets which you believe your significant other should not have an entitlement to.
- Financial Certainty: BFAs provide a level of financial certainty by outlining how assets, debts, and other financial matters will be handled in the event of separation or divorce. This pre-emptive clarity minimises conflicts during an already challenging period and ensures that the decision-making does not fall upon the Court.
- Tailored Agreements: A BFA allows the parties the flexibility to customise the terms of their arrangement and to consider and deal with property that might not fall within the conventional jurisdiction of the Court, such as overseas assets. This flexibility ensures that the agreement aligns precisely with the unique circumstances and preferences of the parties involved.
Are there any risks involved?
Although there are benefits in executing a BFA, there are some consequences to consider:
- Emotional Implications: Broaching the subject of potential challenges arising from the dissolution of a marriage or relationship can be a delicate and, at times, sombre task. Discussing matters that hinge on the possibility of a separation or break-up may introduce discomfort and strain, possibly creating a perception that one party prioritises financial concerns over emotional aspects within the relationship. It may be best to approach the subject of a BFA early on, to ensure the parties have the opportunity to establish expectations, foster clarity, and address any concerns.
- Change in circumstances: It is important to update your BFAs to ensure that any change in circumstances is contained in the agreement, whether that may be the birth of any children, or receiving any substantial sum of money, such as an inheritance. Maintaining the agreement’s currency is essential to prevent the BFA being invalidated.
- Strict Compliance: BFAs have strict legal requirements that they must satisfy in order to be considered valid under the Family Law Act. Failure to adhere to all requirements may invalidate the agreement.
How do I create a valid BFA?
Section 90G of the Family Law Act outlines the formal requirements for a BFA to be binding and enforceable. These include:
- Putting the agreement in writing;
- Seeking and obtaining Independent Legal Advice; and
- Receiving a Certificate of Advice.
One crucial requirement is to ensure that, before signing the BFA, each spouse has received independent legal advice from a legal practitioner. This advice will need to outline the effect of the agreement on the rights of that party and the advantages and disadvantages for that party at the time that the advice is provided.
Hence, if you intend to execute a BFA, please reach out to our firm. We specialise in drafting and offering advice on BFAs for individuals in marriages or de facto relationships, as well as those who have recently separated or divorced.
Can a BFA be invalidated?
Under certain circumstances, BFAs can be invalidated. This can be a result of:
- Non-compliance with the provisions of the Family Law Act;
- Duress, undue influence, or unconscionable conduct;
- Fraud or an attempt to defraud;
- A change in circumstances that makes the BFA impracticable or inequitable; or
- Any other circumstance that, in the discretion of the Court, warrants setting aside the agreement.
While Binding Financial Agreements are a valuable instrument in family law matters, they come with both advantages and potential pitfalls. Seeking legal advice is necessary to ensure compliance with the Family Law Act and to safeguard the BFA’s effectiveness.
This article is not meant to act as legal advice and serve the purpose of providing academically generalised information regarding the general principles regarding Family Law. If you require qualified legal advice on anything mentioned in this article, our experienced team of solicitors at Foulsham & Geddes are here to help. Please get in touch with us on 02 9232 8033 today to make an enquiry.