A binding financial agreement can be made before, during or after a relationship. What they do, when they hold up, and when they don't.
A binding financial agreement (BFA) — often called a 'prenup', though that name is only half right — lets a couple decide in advance how their property would be divided if they separated, instead of leaving it to a court. They can be made before, during, or after a relationship.
It can quarantine assets one person brought into the relationship, set out how property and finances would be split, and deal with spousal maintenance. For people coming into a relationship with a business, an inheritance, or children from a previous relationship, it provides certainty and protects what matters to them.
BFAs are powerful but technical. For an agreement to be binding, each person must receive independent legal advice before signing, each must get a signed statement from their own lawyer confirming that advice, and the agreement must meet the formal requirements of the Family Law Act. Miss a step and the agreement can be set aside.
Even a properly made BFA can be set aside in limited situations — for example if there was fraud, if one person did not disclose significant assets, if it was signed under pressure, or if circumstances changed so much (such as a child being born) that enforcing it would cause hardship.
The single most common reason BFAs fail is incomplete financial disclosure. Both people must lay out their full financial position. A BFA built on a hidden asset is a BFA built on sand.
Is it right for you?
BFAs are not for everyone, and they are not romantic paperwork — they are risk management. If you have assets to protect or are entering a second relationship, it is worth understanding your options. We can explain whether a BFA, or a different approach, suits your situation.
General information only, not legal advice. For advice on your circumstances, contact HT Law Services on (02) 9280 1548.