In the event that you separate from your partner or spouse, it is important to take care of issues concerning your property and finances in a timely manner, and where possible, by consent. Litigation is expensive, with many court proceedings costing parties up to $70,000.00 each if the matter proceeds all the way to a trial.
Where possible, it is usually of great financial and emotional benefit to people when their family law matters are resolved early, and without the need for the Court’s intervention. This generally takes good faith, along with some concessions and compromise from both parties.
If you are able to reach agreement, one of the ways to formalise that agreement is through a Binding Financial Agreement. But what is a Binding Financial Agreement? What do they do? Are they a good idea, or not?
To borrow (and slightly alter) a famous Shakespearean quote:
Read on MacDuff!
What is a Binding Financial Agreement?
A Binding Financial Agreement is a written agreement between you and your former spouse or partner, which formally records the agreement you have reached in relation to how your property and finances are to be dealt with subsequent to your separation.
The form of the agreement and the requirements for it to be binding, are set out in the Section 90G & 90UG of the Family Law Act 1975 (Cth), which are:
It must be signed by all parties;
Each party must be provided with a signed statement by the legal practitioner stating the advice was provided;
A copy of the statement referred to in Point 3 must be provided to the other party, or the solicitor for the other party.
Advantages of a Binding Financial Agreement
First, we should examine some of the advantages of entering into a Binding Financial Agreement.
Advantage One – Cost-Effective
A binding financial agreement is cost-effective way in which to resolve your property and financial matters without the need for the intervention of the court.
Broadly speaking, most binding financial agreements (and their accompanying independent advice) can cost between $5,000.00 and $10,000.00, depending on the degree of complexity involved in the drafting.
Compare this to the $50,000.00 – $70,000.00 a person might spend on protracted and stressful litigation; binding financial agreements provide a cost-effective way to resolve matters if there can be an agreement reached.
Advantage Two – Role with Estate Planning
The terms of a Binding Financial Agreement can work to ensure that an individual or couple’s property and finances are dealt with in the manner they intended. When coupled with effective estate-planning (a distinct area of law to family law), Binding Financial Agreements can complement and work in conjunction with any documents or instruments prepared to assist an individual or family to arrange the transfer of assets in anticipation of death.
Turnbull Hill Lawyers also have an estate-planning team to help ensure there is an efficient and effective distribution of your estate after your death.
Advantage Three – Tax Benefits
There are tax benefits to entering into a Binding Financial Agreement to resolve your family law dispute, most notably, all parties to the agreement will be exempt from paying Stamp Duty on any transfer of property required under the terms of the agreement.
Disadvantages of a Binding Financial Agreement
However, Binding Financial Agreements are not a silver bullet for all family law matters, and are not without their flaws. It is important to know what those flaws are to help you decide if a Binding Financial Agreement is right for you.
Disadvantage One – No Regulation
There is no regulatory body that examined or scrutinizes the content of a Binding Financial Agreement. There is also no registration system for formal recognition of the content of a Binding Financial Agreement.
This is partly why it is a legal requirement that you obtain advice from a legal practitioner prior to entering into a Binding Financial Agreement. It is also why you ought to ensure that the legal practitioner you engage to prepare the advice comprehensively reviews and assess the advantages and disadvantages of that particular agreement.
A court will not set-aside (void) a Binding Financial Agreement simply because the terms are unfair.
Disadvantage Two – Can be Set Aside by a Court
However, there are some circumstances where a court can set aside a Binding Financial Agreement. Those circumstances are set out in Sections 90K & 90UM of the Family Law Act 1975 (Cth), and the main ones are:
The agreement was obtained by fraud (including non-disclosure of a material matter);
A party to the agreement entered into the agreement for the purpose of defrauding or defeating a creditor (someone to whom they owed money), or with “reckless disregard” of the interests of a creditor
A party to the agreement entered into the agreement: (a) For the purpose of defrauding another person who is a party to a de-facto relationship with a party; (b) For the purpose of defeating interests of that person for property adjustment under the Family Law Act (c) With reckless disregard for that person
If the agreement is void, voidable, or unenforceable;
If circumstances have arisen since the agreement was made which make it impracticable for the agreement or part of the agreement to be carried out;
Since making the agreement, a material change in circumstances has occurred (circumstances relating to the care, welfare and development of a child of the marriage) and, as a result of the change, the child or the party caring for the child will suffer hardship;
In making the agreement, if one party engaged in conduct that was “unconscionable”
Disadvantage Three – Cannot do without Solicitors
If you and your ex-partner or spouse have come to an agreement, you must obtain independent legal advice from a solicitor. A solicitor’s role in advising in relation to a Binding Financial Agreement, and providing a certificate to that effect, is paramount to enforceability of the agreement.
If you and your ex-partner or spouse do not wish to involve solicitors, you may wish to consider filing an application for consent orders with the court, where there is no requirement to use a solicitor.
Get tailored advice on whether a BFA is right for you
The decision to proceed with a Binding Financial Agreement after you separate is one that should only be made once you and your former spouse or partner have each obtained independent legal advice about whether that is right for you.
Whilst Binding Financial Agreements can be a cost-effective method of resolving your matter by consent, it is important all the requirements are met to protect you and your future.
Call us today
At Turnbull Hill Lawyers, we regularly advise on and draft Binding Financial Agreements for clients from all walks of life and from all areas of the state. We have clients in Sydney, Central Coast, Newcastle, South Coast, Port Macquarie, New England, and Northern NSW.