Understanding Binding Financial Agreements (BFAs)
When a relationship ends, one of the most important considerations is how to divide financial resources. In Australia, parties can use a Binding Financial Agreement (BFA) to formalise financial arrangements outside of Court. A BFA can provide certainty, reduce conflict, and minimise the need for litigation.
What is a Binding Financial Agreement
A Binding Financial Agreement is a legally enforceable contract between parties in a relationship that sets out how property, financial resources, and spousal maintenance will be managed during or after the relationship. BFAs can be made:
- Before marriage (pre-nuptial agreement),
- During marriage, or
- After separation or divorce.
BFAs are recognised under the Family Law Act 1975 (Cth) and, for de facto relationships in Western Australia, under the Family Court Act 1997 (WA).
Benefits of a BFA
Clarity and Certainty – Parties know in advance how financial matters will be handled.
Control – Parties can agree on arrangements that suit their unique circumstances rather than relying on the Court’s decision.
Efficiency – Reduces the likelihood of disputes and costly litigation.
Protection – Safeguards individual assets, inheritances, or business interests.
Key Requirements for a BFA
To be legally binding, a BFA must meet strict legal requirements:
- The agreement must be in writing and signed by both parties.
- Each party must receive independent legal advice about the effect of the agreement on the rights of that party, and advantages and disadvantages of the agreement at the time the advice was provided.
- Certificate signed by the Lawyer who provided independent Legal Advice be annexed to the agreement.
- The agreement has not been terminated or set aside by a court.
Failing to meet these requirements may render the agreement invalid or unenforceable.
What a BFA Can Cover
A BFA can address a wide range of financial issues, including:
- Protection of inheritances or family businesses.
- Division of property and assets.
- Treatment of superannuation.
- Spousal maintenance.
When to Consider a BFA
A BFA is particularly useful when:
- Parties want to minimise the potential for disputes in the future.
- One party has significantly more assets than the other.
- There are business interests or inheritances to protect.
- Parties want certainty about financial matters before marriage, during marriage, or following separation.
Summary
A Binding Financial Agreement provides parties with a flexible, legally enforceable way to manage their financial affairs and plan for the future. While it cannot replace professional legal advice, a well-drafted BFA can reduce uncertainty, avoid lengthy Court proceedings, and help both parties move forward with confidence.