Prenuptial Agreements vs Binding Financial Agreements (BFA’s) – what are they and do I need one?
Prenuptial Agreement. Do I need one? Why? How?
We hear a lot about Prenuptial Agreements from our favourite legal tv shows, but are they a reality in the Australian legal system?
In Australia, we have Financial Agreements or Binding Financial Agreements. These Agreements are governed by the Family Law Act 1975 (Cth).
A ‘pre-nuptial’ Financial Agreement is a way of recording what each person is bringing into a relationship – whether this be a marriage or a de facto relationship.
It is not created in expectation of a divorce. Rather a pre-nuptial agreement can help a couple talk through important issues.
Can a Financial Agreement only be made ‘pre-nuptials’?
No, you can make a Financial Agreement dealing with the division of property interests at any stage of a relationship. There are 6 different types of Financial Agreements:
1. before a de facto relationship (S90UB);
2. during a de facto relationship (S90UC);
3. following separation of a de facto relationship (S90UD);
4. before marriage (S90B);
5. during marriage; or (S90C); and
6. following divorce (S90D).
What can and can’t a Financial Agreement deal with?
A Financial Agreement can’t deal with parenting matters or child support; nor can it deal with a person’s estate after death.
A Financial Agreement can deal with a wide range of issues including the following:
· Quarantine of pre-relationship assets (or later assets purchased with those funds), or any other arrangement parties wish to make regarding distribution of those assets on separation.
· Quarantine of inheritance received before, during or after relationship, or any other arrangement parties wish to make regarding distribution of those assets on separation.
· Spousal maintenance.
· Superannuation – superannuation can be split and a portion rolled over to the partner’s name on separation.
· Plan for division of jointly owned or acquired assets and liability during the relationship.
· Plan for adjustment of distribution following the birth of children (if any).
Why do I need a Financial Agreement for property settlement?
Without the protection of a Financial Agreement (or Consent Orders) documenting the transfer of property or superannuation between parties on the breakdown of the relationship, there is a risk that the other party will make a further claim in the future.
The risk is higher for married people who separate but do not divorce for many years as they can make an Application for adjustment of property interests in the Federal Circuit and Family Court of Australia at any time until the first anniversary of the divorce date.
Orders are enforceable by the Court if something goes wrong and a party can seek enforcement of a term in a Financial Agreement through the court system if required.
While a BFA is not essential, it can be a helpful tool to use when planning your future together.
