How Tight Is An Airtight BFA?
Preparing an Airtight Binding Financial Agreement
Binding Financial Agreements (BFA), also referred to as “pre-nups” are created when two parties have made a fully informed decision to enter into a binding agreement. The creation of an Airtight Binding Financial Agreement requires the parties to disclose their financial position, provide reasonable time to consider the agreement and obtain independent legal representation to avoid any undue influence or pressure on the other party.
This document effectively allocates assets and other financial resources in the event the marriage or relationship ceases. Whilst many people believe planning for divorce before the marriage begins is controversial or otherwise “unromantic”, a BFA is an integral part of prudent estate planning. This document is a mechanism similar to the preparation of a will or enduring power of attorney.
Requirements of Creation
To create a binding financial agreement, several requirements must be met in accordance with the Family Law Act, including:
- Each party receiving independent legal advice;
- Both party’s lawyers signing a certificate that advice has been provided; and
- Both parties acknowledge they have received said advice.
If these requirements are not met, the agreement can be set aside by application to the Federal Circuit Court of Australia. In addition to failing formal requirements, the agreement may also be set aside in circumstances where:
- The agreement is subject to fraud, undue influence or unconscionability;
- There has been a material change making the agreement impractical or void; or
- The effect of the agreement would cause hardship on one party where a child is
To ensure your BFA will stand up against the law, the document should be constructed to avoid grounds which would vitiate the agreement. This involves following the correct process:
- Receipt of competent independent legal advice;
- Compliance with legislation;
- Reasonable and fair provisions for the non-moneyed spouse/party; and
- Client’s knowledge of unreasonable pressure, influence, demand or conduct.
First and foremost, both parties must disclose their true financial or monetary asset position. In circumstances where one party attempts to hide significant assets from the spouse, the BFA may be set aside. The issue of timing is also paramount to enforceability. If you are planning on having children or have a significant life change coming up in the future, think about how these events will affect the BFA. The requirement of reasonable and fair provisions are also crucial to the legality of the document. If the document features overbearing provisions, causes unnecessary hardship on one party or is unfair to the non-moneyed spouse, the Court may set aside the BFA.
The last consideration, which is perhaps the most important, is the client’s receipt of competent independent legal advice and understanding of what constitutes unreasonable pressure, influence, demand or conduct. If a person displayed behavior which is unconscionable, is likely to place undue influence or duress on the other party, the Court will usually set aside the agreement.
To understand more, and seek clarity on your matter to create an Airtight Binding Financial Agreement please consider a Free 20-minute initial consultation with an experienced family lawyer in Brisbane.