Starting a new relationship brings excitement and hope, but it can also raise questions about protecting your financial interests. Many Australians wonder if they can safeguard their assets when entering a new relationship. A Binding Financial Agreement (BFA) might be the answer you’re looking for. These legal documents, sometimes called ‘prenups’, offer a way to clarify financial arrangements between couples. If you’re concerned about protecting your property, business interests, or inheritance, consulting with child custody lawyers in Melbourne who also handle financial matters can help you understand your options.
Key Takeaways
- BFAs are legally recognised agreements that can protect assets when entering a new relationship
- To be valid, both parties must receive independent legal advice and fully disclose their finances
- BFAs can be challenged on grounds including non-disclosure, duress, or fraud
- Regular reviews and updates are essential to maintain the agreement’s effectiveness
- Complementary estate planning is recommended alongside a BFA
What is a Binding Financial Agreement (BFA) in Australia?
Legal Basis and Types
BFAs are legally recognised under the Family Law Act 1975. They come in three main forms: pre-relationship agreements (under section 90B), agreements during a relationship (under section 90C), and post-separation agreements (under section 90D). Each type serves different purposes depending on your relationship stage.
What Matters a BFA Can Cover
A properly drafted BFA can address property division, superannuation interests, and spousal maintenance. It allows couples to decide how their financial matters will be handled rather than defaulting to the Family Law Act provisions. This gives you control over your financial future.
What a BFA Cannot Validly Decide
It’s worth noting that BFAs cannot make binding decisions about parenting arrangements or certain child support matters. These issues remain governed by separate legal frameworks focused on the best interests of children.
How a BFA Can Protect Assets in a New Relationship
Scope of Protection
A well-crafted BFA can protect various assets, including inherited property, business interests, separate property acquired before the relationship, and future gifts or inheritances. This protection can be particularly valuable for those entering second relationships with existing assets.
“A properly drafted Binding Financial Agreement acts as a financial safety net, allowing both parties to enter a relationship with clarity and confidence about their asset protection.” – Testart Family Lawyers
Practical Examples and Scenarios
Consider the business owner entering a new relationship who wants to protect their company from potential claims. Or the parent who has received an inheritance they wish to preserve for their children from a previous relationship. A BFA can address these specific scenarios with tailored provisions.
Limits to Protection
BFAs aren’t bulletproof. They can be set aside by courts if there’s evidence of non-disclosure of assets, duress during signing, or if the agreement is fundamentally unfair. Major changes in circumstances, such as having children, can also affect enforcement.
Formal Requirements for a Valid BFA
Writing and Signatures
For a BFA to be legally binding, it must be in writing and signed by both parties. Electronic signatures may be acceptable in some circumstances, but physical signatures are generally preferred for greater certainty.
Independent Legal Advice Certificates
Each party must receive independent legal advice about the agreement’s effect on their rights and the advantages and disadvantages of entering it. The lawyers must provide certificates confirming this advice was given.
Full Financial Disclosure
Complete and honest disclosure of all assets, liabilities and financial resources is essential. Hiding assets can be grounds for invalidating the agreement later, potentially exposing all your assets to claims.
Timing and Other Formalities
The timing of when an agreement is entered into can affect its validity. Agreements signed under pressure (such as days before a wedding) may be more vulnerable to challenge than those with ample time for consideration.
Common Grounds to Challenge or Set Aside a BFA
Australian courts may set aside BFAs for several reasons:
- Improper legal advice or problems with certificates
- Non-disclosure or misrepresentation of financial positions
- Evidence of coercion, undue influence, or duress
- Significant changes in circumstances, particularly relating to children
- Family violence that affected a party’s ability to make free choices
How to Draft a Robust BFA for a New Relationship
Preparation Steps
Begin by creating a comprehensive inventory of your assets and liabilities. Collect supporting documentation and consider having high-value assets professionally valued to establish a clear baseline.
Working with Lawyers
Choose experienced family law practitioners who regularly draft BFAs. Each party needs their own lawyer to satisfy the independent advice requirement. Be open about your objectives so your lawyer can draft appropriate terms.
Recommended Clauses and Protections
Effective BFAs typically include clear definitions of separate property, provisions for treatment of future assets, business protections, and superannuation considerations. Including dispute resolution mechanisms can also be valuable.
Review and Update
A BFA isn’t a “set and forget” document. Schedule periodic reviews, particularly after major life events such as marriage, having children, or significant changes in financial circumstances.
Costs, Timeframe and Practical Considerations
Legal fees for BFAs typically range from $3,000 to $10,000+ depending on complexity. This may seem substantial, but it’s a fraction of potential costs if relationship property disputes end up in court. The process usually takes 4-8 weeks from initial consultation to signing.
To save costs while maintaining enforceability, come prepared with organised financial information, be clear about your objectives, and respond promptly to your lawyer’s requests for information.
Alternatives and Complementary Steps to a BFA
A BFA works best as part of a comprehensive financial planning strategy. Consider complementing your agreement with:
Updated wills that align with your BFA provisions
Appropriate trust structures for business or family assets
Binding death benefit nominations for superannuation
Frequently Asked Questions
Will a BFA always be enforced by courts?
No. Courts can set aside BFAs that fail to meet legal requirements or in circumstances of fraud, duress, or unconscionable conduct.
What happens if one party receives a large inheritance after signing?
This depends on how your BFA is drafted. A well-written agreement can specify how future inheritances will be treated.
Can a BFA cover future property acquired during the relationship?
Yes, but these provisions must be carefully drafted to be clear about how future assets will be classified and divided.
What to do if the other party refuses to sign or disclose?
You cannot force someone to enter a BFA. If transparency is an issue, this might be a relationship red flag worth addressing before proceeding.
How long should I keep records and legal advice documents?
Indefinitely. These documents may be critical if the agreement is ever challenged.
Protecting Your Financial Future
BFAs can offer strong protection for your assets when entering a new relationship, provided they’re properly drafted and executed under Australian law. The keys to an enforceable agreement include full financial disclosure, genuine independent legal advice for both parties, clear drafting, and regular reviews as your circumstances change.
If you’re considering a BFA, don’t wait until your relationship is well established or marriage is imminent. Early planning provides the best protection and avoids the appearance of pressure. For expert guidance tailored to your specific situation, Testart Family Lawyers can help you navigate the complexities of financial agreements and ensure your assets remain protected.
