While every family law matter is as unique as the individuals involved, there is a common thread that is observed by many lawyers. That is, the person on the other side of a family law dispute is behaving very differently toward our client than our client expected that person to behave. This change in behaviour is rarely welcomed by our client.
Our family law framework is, at its best, a blunt instrument that seeks to balance parties’ often very different perspectives on the value and content of their personal effort throughout the course of a relationship. Any measures that can be put in place to avoid the use of that particularly blunt instrument by otherwise reasonable people can be recommended.
Australia’s take on “pre-nups”
The ubiquitous use of American legalese means that most Australians will be familiar with the term “pre-nup”, or pre-nuptial agreement, as the enforceability or otherwise of such agreements between wealthy celebrity couples often makes headline news and juicy gossip.
In Australia, we have statutory provisions in place that allow parties in de facto relationships or marriages, to enter into far-less glamorously named Binding Financial Agreements (“BFAs”). BFAs can be made either before parties have commenced cohabitation, at any point during their relationship, or after their relationship has ended. BFAs enable individuals to “contract out” of the blunt and often impersonal family law system, by agreeing how their property matters will be dealt with if or when they break up. BFAs offer certainty and can be structured in accordance with the parties’ wishes, without regard to the legislative provisions that would apply to a determination of their property settlement, if their matter went to Court.
At Lynn and Brown Lawyers, we have seen a marked increase in the uptake of BFAs by couples in the early stages of relationships, particularly amongst couples where there is a disparity in wealth or income, for those entering a second or subsequent relationship, or where there is a likelihood of a large inheritance or family gift to be received by one of the people in the relationship.
Making a valid BFA
BFAs are only enforceable if the parties receive written advice from a suitably qualified legal practitioner as to the effect the BFA will have on their entitlements, specifically the advantages and disadvantages of entering into the BFA. Each party’s lawyer must sign a certificate, stating that they have given their client that advice, and that certificate must be attached to the BFA, otherwise the BFA is not valid.
A party doesn’t have to follow the advice they receive from their lawyer, and individuals may still choose to enter into a BFA, even though they have been legally advised that it is to their disadvantage – that is the freedom adults have to make contracts on whatever terms they choose. However if, in due course, a Court decided that enforcing the BFA would cause hardship to any children of the relationship, the Court may decide to overturn the BFA. BFAs can also be overturned if they were entered into under duress (the night before the wedding is NOT a good time to be entering into a BFA!). If a party seeking to rely on the BFA is found to have committed fraud, that may also invalidate the BFA.
When should I make a BFA with my partner?
It may be stating the obvious to say that at the beginning of a de facto relationship or a marriage, parties will usually deal with each other more fairly than they will at the end. With that awareness in mind, it is far more practical to discuss any concerns that either party may have as to the financial implications of their relationship in the early stages, when positive feelings and good natures are to the fore, than when the relationship has hit treacherous seas that may ultimately result in its demise.
The secret to a BFA is, however, in the name – it is, by definition, an agreement. Therefore, a good time to enter into a BFA is really any time that you and the other party can agree! Financial discussions are often very difficult discussions to have. Each set of individuals will have a different approach and different priorities at each stage of their relationship.
Being pragmatic about finances at the outset may provide a couple with the certainty that they need that the other is not there for any reason other than love (particularly pertinent for people who come to a relationship with substantial resources). At the other end of the spectrum, if a relationship has ended and both parties just want to move on with their personal lives but they have ongoing joint financial commitments and are able to separate the personal from the professional, then a BFA may offer a solution that would not be available from the Family Court; this is particularly relevant for couples who want to separate their personal property but continue as business partners together, for example.
Whatever the reason for entering into a BFA, the agreements can be effective tools that parties can use to achieve certainty as to the financial aspects of their relationship. Relationships are often challenging in many aspects, and having solid ground in respect of finances is an opportunity that increasing numbers of Australians are taking.
Lynn & Brown Lawyers encourage anyone with questions about BFAs or any other aspect of family law to get in touch with one of our experienced family lawyers. You can contact us through our website www.lynnandbrown.com.au or by calling 08 9375 3411.
About the Authors: This article has been authored by Alison and Jacqui. Alison is a career-change lawyer who undertook her legal studies as a mature age student. She completed her Bachelor of Laws with Edith Cowan University in November 2022, her Graduate Diploma in Legal Practice with the College of Law in May 2023, and was admitted as a Lawyer in the Supreme Court of Western Australia in August 2023. Jacqui has over 20 years’ experience in legal practice and practices in family law, mediation and estate planning. Jacqui is also a Nationally Accredited Mediator and a Notary Public.
