In part 2 of our series on Binding Financial Agreements (BFAs), we discuss the requirements for making a valid BFA, and the circumstances in which they can be set aside by the Court. You can read part 1 here.
What makes a BFA binding?
For a BFA to be legally binding and enforceable, there are technical requirements which must be strictly complied with, including:
- The BFA must be in writing and signed by both parties.
- Prior to signing the BFA, each person must receive independent legal advice from their lawyer about how the BFA affects their rights, as well as the advantages and disadvantages of the BFA.
- Each lawyer must sign a certificate confirming the independent legal advice and copies of the certificate must be provided to each party.
Can a BFA be set aside by the Court?
The purpose of a BFA is to avoid the parties going to Court to deal with the division of their property. Despite this, the Court has the power to set aside a BFA in certain situations, including:
- The BFA is entered into under duress. For example, the husband pressures the wife into signing a BFA by threatening not to marry her shortly before the wedding.
- A party fails to disclose assets or financial information. For example, the wife fails to disclose an investment property, or the husband fails to disclose an interest in a family trust.
What steps can be taken to ensure your BFA is enforced and won’t be set aside?
- A BFA properly drawn and considered is a useful tool in asset protection, particularly in family businesses (which tend to have a life of their own!).
- Engage a skilled family lawyer who is experienced in drafting BFAs. BFAs require specialised family law advice and careful drafting.
- Provide full disclosure of your financial circumstances.
Many parties, both first time marriages and second time relationships, enter into “BFA quarantining” or providing for how their assets are to be divided in the event of a later separation.
It is the BFAs that are entered into hurriedly and under pressure or without consideration of future issues which have had the scrutiny of the Court and been set aside.
For more information please contact a member of our Family law team at Fox and Thomas.