When we start a relationship, we want it to be smooth and secure, but in reality we need to be prepared for the ‘what ifs’.
In Australia, whether you’re getting married or choosing to live together, a couple can avoid future disputes over money by signing a Binding Financial Agreement (BFA), which is a pre-planned financial statement that helps you agree on what you want to do together based on trust and respect. A BFA is like a pre-planned “financial prospectus” that helps each other reach a common understanding, based on trust and respect, of what is the fruit of our joint efforts, what each of us should keep, and who will be responsible for what debts. It is an honest and decent conversation that does not hurt feelings and provides a solid foundation for avoiding misunderstandings and disputes in the future.
A Binding Financial Agreement, or BFA, is a legal property agreement recognized by the Family Law Act 1975 in Australia. It allows partners to make clear arrangements for the distribution of property and debts at different stages of the relationship. A BFA is not only legally binding, it also avoids the need for lengthy and costly legal disputes when the relationship breaks down. It is an arrangement that lays the groundwork for mutual benefit in advance, allowing partners to devote themselves to the relationship in the present with greater peace of mind and focus, without having to worry about the uncertainty of the future.
Depending on the timing of the signing, common types of BFAs include:
– Prenuptial Agreement（Financial Agreement Before the Marriage Under Section 90B）：Signed before marriage or cohabitation
– Nuptial Agreement（Financial Agreement During the Marriage Under Section 90C）：Signed within marriage and including after separation but not yet divorced
– Financial Agreement After Divorce Under Section 90D： Signed after divorce
– Financial Agreement Before/During/After the De Facto Relationship 90UB/90UC/90UD：Signed when unmarried but living together
When can I sign a BFA?
Before the relationship starts: e.g. before marriage or cohabitation, to set out how money will be divided in the future
During the relationship: whether it is a legal or de facto marriage.
After the relationship breaks down: e.g. when separating or preparing for a divorce, a Uniform Agreement for the Fair Distribution of Money
Australian law does not mandate the specific content of a BFA, but the focus may vary depending on the stage at which it is signed (e.g. before marriage, during the relationship, or after the relationship has broken down). From a practical perspective, a well-structured and effective BFA will usually include:
– Asset arrangements: e.g. how property, savings, investments, etc. will be distributed at the end of the relationship
– Debt allocation: e.g. who will be responsible for the mortgage, personal loans, credit cards, etc. and how they will be repaid
– Spousal support: whether one partner will be required to provide financial support to the other partner
– Arrangements for potential future income: e.g. financial implications of possible inheritance, major business development
These arrangements are not only legally enforceable, but they are also an important link in maintaining fairness, transparency and respect in the relationship. The original purpose of agreeing in advance is not to restrict anyone, but to minimize the psychological burden and financial risk for both parties in the unlikely event that the relationship turns sour.
*Of course, not every BFA needs to cover all the terms, but whether or not it deals with key financial issues in a clear and complete manner will have a direct impact on whether or not the agreement is legally valid and can truly fulfill its proper role as a safeguard.
– Provides clarity on financial arrangements: Avoids arguments and uncertainty when the relationship breaks down
– Saves legal costs: Reduces the need for court involvement and avoids a lengthy litigation process
– Protecting assets already in place: especially wealth built up prior to the marriage or assets expected to be inherited
– Fostering trust and communication: frank discussions between the parties in a cooler atmosphere can, in turn, strengthen the foundation of the relationship
In Australia, a BFA cannot be written privately and considered complete, it must be drafted and executed through a lawyer or it may not be legally valid. Even if the agreement is mutually agreeable, there is still a risk that it will not be recognized by the courts if certain conditions are not met.
To ensure that your BFA is valid, the following legal elements should never be overlooked (see sections 90G and 90UJ of the Family Law Act 1975):
– Voluntary signing: the agreement must be signed voluntarily by both parties without pressure, duress or fraud. If it can be shown that a party signed the agreement unwillingly or under duress, the validity of the agreement may be questioned.
– Independent Opinion: each party must obtain an independent legal opinion by its own attorney before signing
– Written Agreements: each party’s attorney must issue a certificate of written legal opinion and provide it to each other
⚠️ SPECIAL NOTE: You cannot share a lawyer or skip the “Independent Legal Advice” step. The absence of any of these elements may invalidate the entire agreement.
Whether you’re about to start a relationship, already living together or facing separation in Australia, a BFA can provide you with a legally secure ‘financial statement’. Rather than creating barriers in a relationship, a BFA helps partners make clear, responsible arrangements based on mutual understanding and respect.
If you are considering this, you may choose to consult with a professional lawyer to find out if it is appropriate for your current situation. Trust in a relationship comes from communication, and financial peace of mind is just as achievable through clear negotiation.
Written by Xueying Yang; Content planning: Sun Gang; Xueying Yang; Proofreading: Sun Gang
The content of this article is based on publicly available information and the author’s understanding, and does not constitute any form of professional legal advice or basis for business decisions. Readers should refer to this article in the context of their own actual situation and consult relevant professionals for specific guidance. The author and the publishing platform do not assume legal responsibility for any consequences arising from the use of the information in this article.
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