The Complete Guide to Binding Financial Agreements/PRENUP 2024

Embarking on a new chapter of life with a partner can bring its share of financial deliberations. Whether you're considering tying the knot or entering a committed partnership, understanding the ins and outs of a Binding Financial Agreement (BFA), commonly known as a prenuptial agreement, is crucial. This article is your comprehensive guide, designed to demystify every question you may have about BFAs or prenups. From the basics of what they are, to the intricacies of their legal standing and implications, we've got you covered. Navigate the financial aspects of your relationship with confidence as we delve into the essentials of Binding Financial Agreements.

General

What is a binding financial agreement/prenup?

A binding financial agreement (“BFA”), also known as a prenuptial agreement (“prenup”), or a postnuptial agreement, separation agreement, divorce agreement, is a private agreement entered into by persons who are about to enter, about to end, or are in de facto or marital relationship.

BFAs are governed by the Family Law Act of 1975, which provides rules on their validity, enforceability and content.

What is the difference between a binding financial agreement and a prenup?

A prenuptial agreement, or a prenup, is usually entered into before a couple gets married.

A BFA on the other hand, can be entered into anytime before, after or during a de facto relationship or a marriage.

What is a prenup in Australia?

The term "prenup" is used mostly in American culture. The official legal term of "Binding Financial Agreement" is used in the Family Law Act of 1975, and in the wider Family Law Legal system.

BFAs would refer to all types of financial agreements, made before, during or after a relationship. A prenup falls under the larger umbrella category of BFAs, being an agreement made before parties enter a marriage specifically.

What does a BFA/prenup look like?

A BFA/prenup often starts off by establishing the parties’ details, their relationship history, and the number of children of the marriage.

Who needs a prenup/BFA?

Anyone who is looking to protect their assets will benefit from a prenup/BFA. Persons who are holding large amounts of assets under their name, especially if it is for the benefit of another person (eg. a parent), would benefit greatly from a BFA that explicitly states that their spouse will not be able to gain an interest in those properties upon separation.

How important is a prenup/BFA?

A prenup/BFA is a powerful legal document. Spouses are able to waive their entitlements to maintenance or property interest based on a prenup/BFA alone, if the agreements are in compliance with regulations, independent legal advice has been given, and the agreement has been drafted well.

A prenup/BFA is important in deterring parties from entering into court proceedings in order to determine property divisions and maintenance amounts. It is a small investment that goes a long way in helping you avoid trial, save on court and professional fees, consequently avoiding a depletion of your asset pool.

Benefits of a BFA/Prenup

What are the benefits of entering a BFA/prenup?

As mentioned above, the main benefit of entering a BFA is to avoid going to trial in the future. A BFA/prenup, if properly drafted, will make it difficult for your spouse to contest the division of matrimonial assets and maintenance amounts, making the separation of your asset pool a much less stressful experience.

Which is better, a prenup or a postnup?

There is no substantial difference between prenuptial and postnuptial agreements, or binding financial agreements made before or after a breakdown of the relationship/separation.

Parties should note that circumstances surrounding separation/relationship breakdown can be vastly different from what parties envision at the beginning of the relationship. There can be substantial changes to either parties' health, earning capacity and amount of assets. As such, parties might find that making a BFA after separation would be more appropriate.

Married couples should also note that they only have 12 months from the date of their divorce order, to start proceedings to contest property divisions or determine maintenance amount. Parties planning to enter into a BFA after their divorce order will need to be mindful of this timeline, should negotiations surrounding the BFA fall through.

Couples in a de facto relationship have 2 years from the end of their relationship, to start proceedings to contest property divisions or determine maintenance amount, unless both parties consent to the commencement of proceedings.

Parties that seek to start proceedings after the relevant time limitation, will have to seek leave from the court.

Validity of a BFA/Prenup

Will my prenup/BFA hold up in court?

A binding financial agreement/prenup, is binding and enforceable. However, the courts can set aside a BFA/prenup if it does not comply with the Family Law Act of 1975.

When can a BFA be set aside?

As established in the Family Law Act, a BFA/prenup can be set aside if there is:

• The BFA/prenup was obtained by fraud (including non-disclosure of a material matter)
• A party to the agreement had entered it for the purpose of defeating creditors
• A party to the agreement had entered it for the purpose of defrauding the other party, or defeating any application for an order in relation to a de facto relationship, or made with reckless disregard of the other party’s interests
• The agreement is void, voidable or unenforceable
• Circumstances much it such that the agreement is impractical
• A material change in circumstances relating to care, welfare and development of a child of the marriage, such that the party having care of the child will suffer hardship
• If a party to the agreement acted unconscionably
• If the agreement covers at least one unsplittable superannuation interest

A BFA/prenup can be declared unenforceable and not binding on the parties if:

• Each spouse party was provided with independent legal advice about their rights, and advantages

Will a prenup/BFA affect my house?

A prenup/BFA will affect your house or any other investment properties you might have, if the clauses in the prenup/BFA state that it shall be divided upon separation. The exact effect of a prenup/BFA on your property will depend on the exact drafting of the document.

Please consult a lawyer in regards to specific effects of your prenup/BFA.

Do I need to get my prenup/BFA notarized?

You do not need to get your prenup/BFA notarized.

Your signatures on the BFA can be witnessed by your solicitor, a Justice of the Peace, or another professional witness. This is to ensure that there are witnesses that can testify that your signature on the BFA is valid, in the event that the validity of your signature is challenged in the future.

When will a prenup/BFA be effective?

The prenup/BFA will become effective the moment both the parties, their respective lawyers, and their relevant witnesses sign the document.

When to do a prenup/BFA

When should I do a prenup/BFA?

You can enter into a BFA any time whether you are in, about to enter into, or have just ended a de facto relationship or a marriage.

Should I get a prenup when I buy a house?

It would be wise to sign a binding financial agreement/prenup whenever you obtain any significant assets while in a de facto relationship or a marriage, if you do not intend to split these assets upon separation.

A prenup/binding financial agreement can be drafted to ensure that the property will remain with you.

When should I sign my prenup?

You should sign the prenup/binding financial agreement only after you agree to all the terms in it, and both parties have obtained independent legal advice in regards to the advantages and disadvantages of entering the BFA.

Can a BFA be done after a divorce order is made?

Yes.

Parties should be aware that they can only make an application to the court for property settlements within 12 months of the date of their divorce order, to start proceedings to contest property divisions or determine maintenance amount.

Prenup/BFA for marriage vs prenup/BFA for de facto relationship - is there a difference?

There are no substantial differences between BFAs made for de facto relationships and marriages.

However, you should seek legal advice if you have signed a BFA while in a de facto relationship,

What a BFA/prenup can do

What can be included in a prenup/bfa?

You can include any agreements that you have made with your partner/ex-partner regarding division of your assets. This can include your residential and investment properties, your superannuation, amounts in your bank accounts, amongst others. This can include a decision to transfer the property to your partner, or sell the property and divide the sale proceeds.

You can include any agreements regarding spousal and child maintenance.

Can a prenup/BFA state that I do not wish to pay spousal/child maintenance/alimony?

Under the Family Law Act, a maintenance clause concerning a spouse or a child must clearly define the specific amount allocated for maintenance, in order to be valid. Should there be a mutual agreement between the parties to exclude maintenance, it is advisable to seek guidance from your family lawyer on how to navigate this situation effectively.

Can a prenup/BFA include child custody provisions?

Child custody and parental arrangement provisions would not be valid under a BFA. the family act requires that prenups/BFAs only pertain to determining how property or financial resources of the parties will be dealt with at a later time, maintenance of either of the parties, or matters incidental or ancillary to these matters.

Can a prenup/BFA protect future earnings?

Clauses can be drafted to protect couples' future earnings. It can also be drafted to protect future inheritances.

However you should consider redrafting a new BFA/postnup if circumstances have changed drastically, to ensure that the BFA will continue to be valid, and draft clauses specific to the newly attained assets or increase in financial resources.

Doing your own prenup/BFA

Can I do a prenup/BFA without a lawyer?

The Family Law Act requires that both parties have to seek independent legal advice before entering into a BFA, for the BFA to be valid. As such, it would be worth your while to get a solicitor to draft your BFA and provide this legal advice.

Should I download and use a binding financial agreement/prenup template?

A template is often insufficient in meeting your specific financial situation. Our clients often come to us for specific requests, such as to split superannuation accounts and to write in agreed upon living arrangements.

It is also important to ensure that all the clauses in the BFA are drafted in compliance with the Family Law Act, such that they are valid and enforceable.

It is also prudent to get a solicitor to ensure that there is proper financial disclosure for the purposes of the BFA. Parties must also obtain independent legal advice before entering a BFA, to be aware of the rights that they may be giving up.

Prenups and Wills

Can I add a clause in my BFA to prevent my spouse/partner from making family provision claims against my Estate?

It is possible to add in a clause in your BFA that states that parties will release their rights to make an application in relation to their partner’s estate, under the relevant family provision acts. The relevant act in NSW is the Succession Act 2006.

The BFA can state that the parties accept that it would be fair and reasonable for each of them to release their rights to a family provision claim at the time of the Agreement.

However, it is important to note that parties cannot contract out of the Succession Act 2006, as it is the objective of the Act to provide for ex-spouses who require financial support.

Although a BFA will not guarantee that your spouse will be prevented from making a future family provision claim, it still has evidence of what the parties thought was fair and reasonable at the time of making the agreement.

Transfer of Property after signing the BFA

How do I transfer my property to my spouse after signing the BFA?

It would depend on the provisions set out in the BFA. The BFA should mention the specific method of transferring the property, and the date of which the party receiving the title will indemnify the other for any mortgage payments or fees in relation to the transfer.

You can hire a solicitor or conveyancer to ensure that the transfer of property for the exchange of a specific sum will proceed smoothly.

A lawyer's role in a BFA matter

The role of the solicitor in a BFA matter is to finalise the agreements already reached by the parties involved.

In instances where reaching an amicable agreement with your former partner regarding property division and maintenance proves challenging, engaging a solicitor to conduct negotiations on your behalf is highly recommended. This step is an essential part of the preparatory process that is both prior to and separate from the creation of a BFA.

Opting to utilize the services of a solicitor for negotiation purposes entails the provision of comprehensive financial disclosures from the past three years. This documentation, which includes but is not limited to payslips, credit and debit card statements, tax assessments and returns, mortgage statements, and records of joint accounts, is crucial. The solicitor uses this information to accurately assess both parties' direct and indirect contributions and to ascertain if there has been any deliberate reduction in the asset pool. This thorough evaluation is fundamental in formulating or considering an offer from the other party.

Engaging in this process is meticulous and demands an exhaustive examination of personal financial records, underscoring the importance of professional legal assistance to ensure accuracy and fairness in negotiations.

It is important to engage the right legal team to handle your divorce matters. At Greigs Legal we prioritize your best interest and provide the guidance needed to navigate these complexities effectively.