Are you considering entering into a new relationship and have some concerns about your finances?

Written on the 13th of July 2010 by Rebecca Flick

If so, a Binding Financial Agreement can be the solution you are looking for...

After the initial stage of a new relationship, our heads start to rule our hearts. Anyone entering a new relationship may have some concerns about their financial vulnerability. Can I pursue a personal relationship without exposing my personal assets?

Many of us are concerned about the challenges of intermingling our finances with new relationships. Taking the risk of losing what we have worked so hard to achieve plays heavily on many peoples’ minds.

What if this new relationship breaks down? Am I going to lose it all and have to start again? Will I have the energy and appropriate state of mind to fight for my own assets? Will the Courts need to get involved to order a property division? Is my children’s inheritance protected?

Consider this scenario:

David recently found a new partner. However, David has been married and divorced before and has experienced the difficulties of a separation. David also has a young daughter to his first wife.

David has a number of assets which include four properties, a motor vehicle, a share portfolio and a significant amount of superannuation.

David's new partner Rachael also has a child to a pervious relationship and some assets.

Rachael has a property, a motor vehicle and superannuation. She also operates her own business which provides her with a stable income.

David is concerned that on entering into his new relationship he may put his assets at risk if the relationship does not work out the way he hopes. He is very concerned that his daughter's inheritance may be diminished or lost as a result of his relationship with Rachael.

David feels like he needs asset protection from his relationship with Rachael, yet he does not wish to upset the relationship which is currently working so well.

David feels like he has to choose between being happy with Rachael and feeling safe about his future finances.

Although, David is not just thinking of himself here, he sees that Rachael has assets, a business and a child to consider as well.

If David and Rachael were to separate both of them are at risk of losing what they had worked so hard to achieve in life. They may even find themselves before a Court having the Court decide how their assets should be divided between them.

There is a way that David and Rachael can reduce their financial vulnerability. They can enter into a Binding Financial Agreement which details what is to occur with all of the assets and debts of the relationship if David and Rachael separate, even though they have already started their relationship and may have already combined some of their finances.

A Binding Financial Agreement entered into now by David and Rachael can provide for a fair and reasonable outcome for both David and Rachael if the relationship fails. This can save them the stress, costs and arguments which often follow a breakdown of a relationship. It could even lower their current stress in the relationship as both David and Rachael can feel secure in knowing that if the relationship does not work they will not have to start over again financially, that they will not be left with nothing.

Is there any way David and Rachael can be happy in their new relationship, without the fear that either could lose everything if things go wrong? Can they be protected if things go wrong? …

The answer is yes. All of these concerns can be addressed prior to entering into a new relationship, during a current relationship, or after separation.

You can protect yourself and the ones you love by entering into a Binding Financial Agreement.

What is a Binding Financial Agreement?

A Binding Financial Agreement (BFA) is a document that can be entered into with a partner prior to a relationship, during the relationship or after separation.

BFAs have been commonly termed; prenup, prenuptial agreements, post nup, cohabitation agreements, divorce agreements, defacto agreements, separation agreements, financial agreements and the like. Of course, Financial Agreement is the term used in the Family Law Act.

Who can be helped by a BFA?

BFAs can apply to people:

a) contemplating entering into a relationship (marriage or defacto including same sex defacto relationships);
b) happily in a relationship (married or defacto including same sex defacto relationships);
c) after the end of a relationship (married or defacto including same sex defacto relationships).

What is the purpose of a BFA?

A BFA is an agreement which makes financial arrangements for people in the event of their relationship breaking down. A BFA deals with the difficult issue of dividing property and financial resources. They can also deal with the need for the ongoing financial support of a person to the relationship after it has ended. In some instances it is appropriate for the working spouse to provide a weekly payment to the other spouse following the breakdown of the relationship because of inability of that person to self support, this could be due to such things as the care of a child and lack of skill to obtain gainful employment.
A BFA can help you come to an agreement on the division of property in the event of, or following separation, without the need to make an application to the Family Court.

What can a BFA deal with?

In entering into a BFA you can successfully make your own rules about the financial aspects of your relationship and deal with such issues as:

• the division of property, including businesses and trusts;
• payment of maintenance.

You can even reach agreement about how the finances are intermingled. You can agree on how each person in the relationship can deal with their own money and joint money.

You can:

• Specify rules for the buying and owning property;
• Coordinate and support your estate plans, to be sure that family property passes as you wish.

You can also avoid costly litigation following a relationship breakdown.

There are many advantages a BFA can provide you with.

One of the main advantages of a BFA is that it allows you and your partner to stipulate in writing what you believe is an equitable division of your assets and resources when your relationship is harmonious.

It makes sense to enter into negotiations with your partner when you are planning to live a harmonious life together because it can lead to an agreement that both parties find fair and reasonable. It can eliminate any niggling doubts, reduce stress and strengthen your relationship.

A BFA is the only way in the Family Law by which an agreement can be entered into in order to contract out of certain rights and entitlements that are provided for under the Family Law Act.

A BFA can only be entered into when the parties to the agreement consent to it and obtain independent legal advice.

If you have any questions, please call on 02 4904 8000 or email.

Disclaimer - This article is offered for general information purposes only. It is not offered as and does not constitute specific legal advice or opinion. The accuracy of the information is not guaranteed. You should not act or rely upon any of the information contained within this article without seeking the advice of a qualified solicitor who specialises in the particular area of expertise and jurisdiction that you require.