Binding Financial Agreements – Do They Kill The Romance?

Binding Financial Agreements (‘BFA’), popularised as pre-nuptial agreements in America are often touted as “romance killers”, and there have been many examples before the Family Court which support this view.

Instances such as a groom handing to his future wife an agreement contemplating weight gain and her leaving him for a younger man or bride handing the groom a BFA the day she had won the lottery certainly add to this.

Despite these extreme examples, with changing family demographics BFA’s are growing in popularity and their effects need to be considered by those wishing to enter into them.

BFA’s contemplate what happens to the property and financial resources of each party in the event of separation or relationship breakdown. BFA’s can be entered into:

  1. Prior to marriage of commencement of a de facto relationship.
  1. During a marriage or de facto relationship.
  1. After the divorce of breakdown of a de facto relationship.

Parties must remember that a relationship is organic and many things change, such as having children, contributions to the asset pool, and realisation of financial resources can affect property or financial resource divisions envisaged by the parties upon entering into the agreement.

For the above reasons, it may not be the most prudent course for parties.

As such, often BFA’s are entered into by couples entering a relationship after the breakdown of their first relationship as they may have children from that relationship or there may be a substantial difference as to their asset pools.

Effectively a BFA ousts the Courts jurisdiction in relation to the division of the asset pool in the event of a relationship breakdown.

In some instances BFA’s are entered into 10, 20, 30 or 40+ years prior to when their clauses are enlivened and the agreement’s foreshadowed prescriptions are called upon.

Given the above, entering into a BFA has the potential to prolong and complicate any property application in the Family Court which is converse to the original intentions of the parties.

One only has to look at the decisions handed down by their honours in the Family Court to see that BFA’s have a chequered history, however, if drafted well it may be the best protective measure for one’s assets. Parties and practitioners alike must ensure strict compliance with the requirements under the Act.

When used correctly, a BFA could just be the most useful tool for parties to forget about finances and focus on their relationship.