Binding Financial Agreements Before Marriage (prenup)

A Binding Financial Agreement (BFA) before marriage, known as a prenup or prenuptial agreement in the United States, can help protect your assets and provide financial certainty before entering into a marriage or de facto relationship. While no one enters a relationship expecting it to fail, having a financial plan in place can prevent costly disputes in the future.

What Is a Binding Financial Agreement (BFA)?

A BFA is a legal contract that outlines how assets, debts, and financial resources will be divided if the relationship ends. BFAs are legally recognised under the Family Law Act 1975 and can be made before, during, or after a relationship. In this article, we will only discuss a binding financial agreement before marriage.

When to Consider a BFA Before Marriage

A BFA may be worth considering in the following situations:

1. You Have Been Married Before and Have Already Had Your Assets Split
   If you’ve previously gone through a divorce or property settlement, you may want to protect your remaining assets from further claims.

2. There Is an Inequality of Assets Between You and Your Partner
   When one partner has significantly more assets than the other, a BFA ensures financial clarity and fairness.

3. You Own Most of the Assets
   If you bring substantial property, investments, or financial resources into the relationship, a BFA can help protect them from future claims.

4. You Run a Business
   Business owners often use BFAs to prevent their business assets from becoming entangled in legal disputes in the event of separation.

5. Your Family Has Gifted You Assets
   If you have received financial assistance or property from family members, a BFA ensures these gifts remain yours.

6. You Expect to Receive an Inheritance
   A BFA can clarify that any inheritance received before or during the marriage remains your separate property.

7. You Still Do Not Know the True Intentions of Your Partner
   While trust is fundamental to any relationship, financial security is also important. A BFA can provide peace of mind if you are unsure of your partner’s financial intentions.

Legal Requirements for a Valid BFA

For a BFA to be legally binding, it must:

• Be in writing and signed by both parties.

• Be made voluntarily, without coercion or undue influence.

• Include a certificate from an independent lawyer confirming that each party has received legal advice.

Can a BFA Be Challenged or Set Aside?

A BFA can be challenged if:

• One party failed to disclose all assets and financial resources.

• There was fraud, duress, or undue influence.

• The agreement is deemed unfair due to significant changes in circumstances (e.g., the birth of a child or financial hardship).

Considering the Impact on Your Relationship

While a BFA provides financial protection, it’s important to consider how asking your partner to sign one may affect your relationship. Conversations about money can be sensitive, and in some cases, introducing a BFA can create tension or even jeopardise a relationship. Before making a decision, ask yourself:

• How will my partner react to this request?

• Are my financial risks significant enough to justify a BFA?

• How can I approach this discussion in a way that reassures my partner?

It’s essential to balance relationship harmony with financial security and to have an open and honest conversation with your partner about why you believe a BFA is necessary.

Why You Need a Lawyer to Draft Your BFA

If you decide to proceed with a BFA, it is critical to have it drafted by a lawyer to ensure:

• It complies with the Family Law Act 1975.

• It includes all necessary clauses to protect your interests.

• It is clear, fair, and legally enforceable.

Both you and your partner must receive independent legal advice before signing. A poorly drafted BFA or one that is unfairly one-sided may be challenged in court and set aside.

Conclusion

A Binding Financial Agreement can be a valuable tool for protecting your assets and ensuring financial security. However, it is important to consider the impact it may have on your relationship and weigh up whether it is the right choice for you. Seeking legal advice from an experienced family lawyer is essential to ensure your BFA is properly drafted and legally binding.