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What they are and how they work?
A BFA is something that married couples, couples living in a de facto relationship or separated couples can enter into. These types of agreements used to be called 'prenuptial agreements' or ‘financial agreements’ but the legal term is 'Binding Financial Agreements' (BFA).
You can make a binding financial agreement before, during, or at the conclusion of a marriage or de facto relationship.
There are a number of situations where a BFA may be required. Typically, these types of situations may arise when you and your partner are initially in an unequal financial position and some certainty is required about the division of assets should the relationship fail. Another situation is where you and your partner need to clarify the assets and liabilities prior to the relationship and you wish to keep them separate should the relationship not last. A BFA may also be used where you or your partner wish to protect business interests or ownership or you may be seeking to protect an inheritance or heirlooms that have been left to them.
A BFA can specify how you and your partner have agreed to divide the asset pool in the event the relationship fails. It can include things such as:
Yes, provided they have been set up correctly. For a financial agreement to be legally binding, you must both have received independent legal and financial advice before signing the agreement, and there is a very strict criteria that must be followed to ensure the document is binding. They should also be reviewed every two years or after a significant event in your lives, such as the birth of a child or one party receiving an inheritance.
A correctly executed BFA may provide some degree of certainty in the event that a relationship ends as both parties have agreed as to how the property will be divided. In some instances, you may avoid having to go to court to enforce the agreement if the document is prepared and revised correctly.
To correctly create a legally binding BFA takes time as your solicitor needs to address all the areas you want documented in the agreement.
The cost of creating a simple BFA will be considerably less than creating one involving complex trusts and significant assets. Please call us to discuss your situation and to get an estimate of the potential cost.