Divorce is the last thing somebody would wish for in their marriage. This final breakdown of a marriage can be stressful and traumatic. It affects an individual physically, emotionally, and financially. However, you can try and reduce the effects of a divorce by entering into a Binding Financial Agreement(BFA) with your partner. It will help you understand what happens to assets, possessions, and debts once you divorce. So, what do you need to know about BFAs?
What is a Binding Financial Agreement?
A binding financial agreement(BFA) is a postnuptial, prenuptial, divorce, or cohabitation agreement. It’s a document that governs your property interest at the end of a marriage. Partners use the agreement to decide how they will split assets and liabilities in case of a divorce. Therefore what does a binding financial agreement include:
What is in a binding financial agreement?
A BFA will define how the parties will share their assets in case of a divorce. As mentioned, the agreements deal with property, and financial resources and are broken into clauses that set out:
- Financial support is to be given to one partner by the other.
- Financial settlement, for example, property settlement
- Any Unexpected problems
- The agreed financial arrangements for children
- The BFA can also deal with practical financial issues specific to the couple. For instance, the need to:
- Guarding existing assets or likely inheritances.
- Safeguard family farms or other businesses for coming generations.
- Ensure children in previous relationships inherit
- Give more weight to the contribution of a higher earner.
How binding are BFAs in Courts?
BFAs are binding in courts as long as they have been set up correctly. For these to be binding, specific conditions must be met. If the conditions set by law are not met, then the BFA is invalid or set aside by the court. Each BFA has some features that make it binding.
What makes a Binding Financial Agreement binding?
A BFA is a way to avoid the rules of the Family Law Act. b. However, it is only viable if it adheres to certain requirements of the act. The agreement is viable to both parties only if:
- The BFA is in writing and signed by both parties willingly
- The parties are planning to get into marriage or are getting a divorce
- It has a statement from each party admitting they obtained separate legal advice on their rights.
- A legal practitioner gave their client a signed statement verifying the provision of legal advice.
- The agreement hasn’t been discontinued or set aside by the court
- A copy of the legal practitioner restatement is given to the other party
Note: The Family Law Act says that each party involved in a BFA must acquire independent legal advice. It will help ensure their rights and the agreement terms. Then the legal advisors put their legal advice in a signed certificate attached to the agreement. In addition, a BFA needs to be reviewed every couple of years or after the birth of a child.
Binding financial agreements are important documents to help share property and assets during family law litigation and property settlement after separation. However, for it to be legal, both parties have to do it willingly. Also, they must get legal advice that’s documented, signed and then attached to the agreement.