FINANCIAL AGREEMENTS

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In family law, Financial Agreements (also known as Binding Financial Agreements or BFAs) are legal contracts made between parties that outline how their property, finances, and superannuation will be divided in the event of a separation or divorce. These agreements are a proactive way to manage financial matters, providing clarity and certainty for both parties, and can be made before, during, or after a relationship.

Financial Agreements are often used in situations where couples want to avoid the uncertainty, costs, and stress of a property settlement dispute or court proceedings. They provide a framework for resolving financial matters and can help protect the interests of both parties.

1. Before Separation - A Financial Agreement made before a couple gets married or enters into a de facto relationship. These agreements allow partners to decide how their assets and liabilities will be divided if the relationship breaks down. They are particularly useful for people with significant pre-existing assets or those entering second marriages. These agreements can help protect an individual’s wealth and provide peace of mind before entering into a long-term relationship.
    
2. During Separation - A Financial Agreement made after the couple is married or in a de facto relationship, but before they have separated or divorced. These agreements allow couples to agree on how they will divide their property if the relationship ends. These agreements are particularly useful when a relationship has already encountered difficulties, or when new circumstances arise such as receiving a large inheritance, starting a business, or changes in the financial situation.
    
3. After Separation - A Financial Agreement made after separation and/or divorce. This document outlines how assets, debts, and other financial matters will be divided after the breakdown of the relationship. After separation, this agreement can help settle the financial issues more efficiently and without the need for protracted court proceedings.

• Clarity and Certainty: A BFA provides clear terms for property division, eliminating uncertainty about what will happen if the relationship ends.
• Prevention of Disputes: By agreeing on financial matters upfront, couples can avoid costly and emotionally draining disputes later on.
• Protection of Assets: A financial agreement can help protect pre-existing assets, such as inheritances, businesses, or properties, ensuring that they are divided according to your wishes.
• Flexibility: Agreements can be tailored to meet the specific needs and circumstances of each individual couple, making them a flexible solution for different financial situations.
   

For a Financial Agreement to be legally binding, both parties must:

• Receive independent legal advice: Each party must have a lawyer who explains the terms and effect of the agreement before it is signed. This ensures that the agreement is entered into voluntarily and with a full understanding of its implications.
• Sign the agreement: Both parties must sign the agreement in front of their respective lawyers, who will then certify that they provided the necessary advice.
• Compliance with legal requirements: The agreement must meet specific legal criteria set out in the Family Law Act 1975. This includes ensuring that the agreement is properly executed and the content complies with legal standards.
   

Failure to adhere to these legal requirements can lead to the agreement being declared invalid or unenforceable.

While Financial Agreements are designed to be legally binding, there are certain circumstances under which they can be challenged. These include:

• If the agreement was entered into under duress or undue pressure.
• If there was a failure to disclose significant assets or liabilities.
• If the agreement is considered unconscionable or unjust at the time of enforcement.
• If the agreement does not meet the formal legal requirements.
   

In these cases, a court may set aside or alter the terms of the agreement.

At MD Law Group we can guide you through the process of creating a Financial Agreement that suits your needs and ensures your financial security, both during the relationship and in the event of separation. Our experienced family lawyers can assist with drafting, reviewing, and providing advice on the enforceability of your agreement.