Binding Financial Agreements (BFA): Your Complete Guide

A Binding Financial Agreement (BFA) is a powerful legal tool under the Family Law Act 1975 that helps couples define how their financial resources, assets, and liabilities will be divided if their relationship ends. Whether entered into before, during, or after a relationship, BFAs offer financial security and clarity for both parties. At Cudmore Legal, we provide expert guidance to help you navigate the complexities of creating and enforcing a BFA.

This guide will take you through everything you need to know about BFAs, from their benefits to when and how they can be challenged. We will also explore the legal process, offer practical tips, and reference key case law to give you a comprehensive understanding of BFAs in Queensland.

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What Is a Binding Financial Agreement (BFA)?

A Binding Financial Agreement is a legally binding contract that outlines how a couple’s financial assets, liabilities, and resources will be managed in the event of a relationship breakdown. It can be signed at various stages of a relationship:

• Before the relationship or marriage: Known as a Prenuptial Agreement, it is used to protect assets one party brings into the relationship.
• During the relationship or marriage: A BFA can be drafted during the relationship to define financial arrangements moving forward.
• After separation or divorce: BFAs can also be used after separation to avoid disputes over property division.

Once a BFA is signed, it overrides the Family Court’s standard decision-making process regarding property and financial matters. The parties agree to the financial terms ahead of time, which prevents disputes from arising and helps avoid the emotional and financial stress of going to court.

Why Enter into a Binding Financial Agreement?

1. Protect Your Assets

One of the main reasons for entering into a Binding Financial Agreement is to protect assets that one party brings into the relationship. Whether it’s a business, property, or inheritance, a BFA ensures that these assets are safeguarded from the Family Court’s jurisdiction if the relationship ends.

Click here to learn about protecting assets from a new partner

2. Financial Clarity and Security

A BFA provides financial certainty, as both parties have a clear understanding of how their assets and liabilities will be divided in the event of separation. This can alleviate stress during the relationship and prevent financial disputes after separation.

3. Avoid Litigation

With a Binding Financial Agreement in place, couples can avoid lengthy and costly court proceedings. BFAs allow for a private agreement on financial matters, eliminating the need for court intervention.

4. Estate Planning

BFAs are also useful tools for estate planning. They can help ensure that assets are distributed according to your wishes and protect specific assets, such as property or shares, that you intend to pass down to family members.

When Does a Binding Financial Agreement Become Legally Binding?

For a Binding Financial Agreement to be legally enforceable, several conditions must be met:

1. Independent Legal Advice: Both parties must receive independent legal advice about the agreement’s effect on their rights and whether the agreement is fair and reasonable.
2. Certification: Both parties’ lawyers must sign certificates confirming that legal advice was provided. These certificates are included as part of the BFA.
3. Written Agreement: The BFA must be in writing and signed by both parties.
4. Full Disclosure: Both parties must provide full and frank disclosure of their financial situation, including assets, liabilities, income, and debts.

Once these requirements are fulfilled, the BFA becomes legally binding and enforceable by the courts.

Can a Binding Financial Agreement Be Overturned?

While a Binding Financial Agreement is legally binding, there are certain circumstances under which it can be challenged or set aside by the court. Common grounds for overturning a BFA include:

1. Fraud or Non-Disclosure

If one party fails to fully disclose their financial circumstances at the time of drafting the BFA, the agreement can be set aside. In Hoult & Hoult [2013] FamCAFC 109, the court overturned the agreement due to the husband’s failure to disclose his full financial assets, highlighting the importance of transparency.

2. Duress, Undue Influence, or Coercion

If one party was pressured into signing the BFA or was not fully informed, the court may declare the agreement invalid. In Thorne v Kennedy [2017] HCA 49, the High Court set aside the BFA due to the wife being pressured into signing the agreement before marriage. The agreement was deemed unconscionable.

3. Unconscionable Conduct

If the terms of the BFA are so one-sided that they unfairly disadvantage one party, the court may set it aside. The court will assess whether the agreement was entered into freely and fairly by both parties.

4. Significant Changes in Circumstances

If there have been significant changes in circumstances since the BFA was signed, such as the birth of a child or a change in one party’s financial situation, the court may set aside the agreement if it becomes unjust or impractical to enforce.

Click here to learn more about Overturning a Binding Financial Agreement.

Case Study: Thorne v Kennedy [2017] HCA 49

In this landmark case, a wealthy Australian man insisted that his fiancée, who was financially dependent on him, sign a BFA just before their wedding. The High Court found that the woman had signed the agreement under duress and undue pressure, as she was threatened with the cancellation of the wedding. The agreement was later set aside by the court as it was deemed unconscionable.

Key Takeaway: Independent legal advice and voluntary participation are crucial to ensure the enforceability of a Binding Financial Agreement.

Frequently Asked Questions (FAQs)

1. Can a BFA Cover Child Support?

No, Binding Financial Agreements cannot cover child support payments. Child support must be handled separately through a Child Support Agreement or the Child Support Agency.

2. Can I Modify a Binding Financial Agreement After It Has Been Signed?

Yes, a BFA can be modified, but only if both parties agree to the changes. Any amendments must be made in writing and both parties must receive independent legal advice before signing the modified agreement.

3. How Much Does a Binding Financial Agreement Cost?

The cost of a BFA depends on the complexity of the financial arrangements and the assets involved. At Cudmore Legal, we offer fixed-fee pricing for BFAs to provide transparency and ensure affordability. Contact us at (07) 3317 8346 for a detailed cost estimate.

4. What Happens if One Party Doesn’t Follow the Terms of a BFA?

If one party breaches the terms of a Binding Financial Agreement, the other party can take the matter to court to enforce the agreement. The court can order the defaulting party to comply with the terms or provide compensation.

Why Choose Cudmore Legal for Your Binding Financial Agreement?

At Cudmore Legal, we have extensive experience in drafting, reviewing, and enforcing Binding Financial Agreements. Our team of expert family lawyers provides:

• Clear and practical advice to help you understand your rights and obligations.
• Tailored legal strategies that reflect your unique financial situation.
• Transparent fixed fees, so you know exactly what to expect.
• Client-first approach, ensuring your financial interests are protected every step of the way.

We prioritise fairness and transparency in all BFAs to help you achieve financial security and peace of mind.

Secure Your Financial Future with a Binding Financial Agreement

Whether you’re entering into a relationship and want to protect your assets or seeking to formalise a financial arrangement after separation, a Binding Financial Agreement provides certainty and peace of mind. At Cudmore Legal, we guide you through the process with expert legal advice, ensuring your agreement meets all legal requirements.

Contact us today at (07) 3317 8346 or book a consultation to discuss how we can assist with your Binding Financial Agreement.