A binding financial agreement (BFA) is a legal document that is used to set out how property and finances will be divided in the event of a separation or divorce. It is a valuable tool for couples who want to avoid lengthy and costly legal battles in the future. However, creating a BFA can be a complex process, and there are several common mistakes that couples make. In this article, we will discuss the common mistakes to avoid when creating a Binding Financial Agreement in Brisbane.
What is a Binding Financial Agreement?
A Binding Financial Agreement (BFA) is a legally binding agreement that sets out how property and financial resources will be divided in the event of separation or divorce. It is a private agreement between two parties and can be made before, during, or after a marriage or de facto relationship. A BFA can cover any or all property and financial resources, including real estate, superannuation, investments, and business assets.
Why Create a BFA?
There are many reasons why couples may choose to create a BFA. Some of the most common reasons include:
- Protection of assets: A BFA can protect assets that have been accumulated before the relationship or marriage.
- Certainty: A BFA provides certainty about how assets will be divided in the event of a separation or divorce.
- Avoiding litigation: A BFA can help avoid costly legal battles in the future.
- Peace of mind: A BFA can provide peace of mind and reduce stress during a separation or divorce.
Common Mistakes to Avoid When Creating a Binding Financial Agreement in Brisbane
-
Failing to Obtain Independent Legal Advice
One of the most common mistakes that couples make when creating a BFA is failing to obtain independent legal advice. Each party to the BFA must obtain their own independent legal advice from a lawyer who is not representing the other party. The purpose of independent legal advice is to ensure that each party understands the terms and implications of the BFA.
According to the Family Law Act 1975 (Cth), a BFA must be signed by both parties and their respective lawyers. Without independent legal advice, a BFA may be deemed invalid and unenforceable.
-
Not Disclosing All Relevant Financial Information
Another common mistake that couples make when creating a BFA is failing to disclose all relevant financial information. Each party must disclose all of its financial resources, including assets, liabilities, income, and expenses. Failure to disclose all relevant financial information can lead to the BFA being challenged and set aside in the future.
-
Not Considering Future Needs
When creating a BFA, it is important to consider future needs. The BFA should take into account the future needs of both parties, including their earning capacity, health, and age. If a BFA is found to be unfair or unreasonable in the future, it may be set aside.
-
Failing to Update the BFA
A BFA should be reviewed and updated regularly to ensure that it reflects any changes in the parties’ financial circumstances or personal situations. If the BFA is not updated, it may not be enforceable in the future.
-
Not Understanding the Consequences of a BFA
Before signing a BFA, each party should understand the consequences of the agreement. A BFA is a legally binding document that can have significant financial implications. Each party should fully understand the terms of the agreement and obtain legal advice if necessary.
-
Not Complying with the requirements of the Family Law Act
The Family Law Act sets out the requirements for a BFA to be valid and enforceable. Failure to comply with these requirements can result in the BFA being challenged and set aside. For example, the BFA must be in writing, signed by all parties, and their respective lawyers, and must be made voluntarily without any undue influence or duress.
-
Using a Template or DIY Approach
While there are templates and DIY kits available online, it is important to avoid using them when creating a BFA. Each BFA is unique and must take into account the individual circumstances of the parties involved. Using a template or DIY approach may result in a BFA that is invalid or unenforceable.
-
Not Considering Tax Implications
A BFA can have significant tax implications for both parties. It is important to consider these implications when creating a BFA. Each party should obtain independent tax advice to ensure that they fully understand the tax consequences of the agreement.
-
Not Considering the Impact on Children
When creating a BFA, it is important to consider the impact that the agreement may have on any children of the relationship. The BFA should ensure that the needs of the children are adequately provided for.
-
Waiting Too Long to Create a BFA
It is important to create a BFA as early as possible in the relationship or marriage. Waiting too long can result in the BFA being challenged and set aside, particularly if one party has significantly more assets than the other.
Conclusion
Creating a binding financial agreement in Brisbane can be a complex process, and there are many common mistakes that couples make. To ensure that the BFA is valid and enforceable, it is important to obtain independent legal and tax advice, disclose all relevant financial information, and consider future needs. It is also important to ensure that the BFA is updated regularly, complies with the requirements of the Family Law Act, and takes into account the impact on any children of the relationship.
FAQ
What are the benefits of creating a binding financial agreement?
A BFA can provide certainty and predictability for both parties in the event of a separation and can avoid the need for costly and time-consuming court proceedings.
Can a binding financial agreement be changed or terminated?
Yes, a BFA can be changed or terminated by agreement between the parties, or by order of the court in certain circumstances.
Is it necessary to obtain legal advice when creating a binding financial agreement?
Yes, it is necessary for each party to obtain independent legal advice from a lawyer who is experienced in family law matters. This is to ensure that the BFA is valid and enforceable.
What is the difference between a binding financial agreement and a consent order?
A binding financial agreement is a private agreement made between the parties, whereas a consent order is an order made by the court. A consent order is generally considered to be more enforceable than a BFA.
Can a binding financial agreement be challenged in court?
Yes, a BFA can be challenged in court in certain circumstances, such as if one party was pressured into signing the agreement or if the agreement is found to be unfair or unreasonable.
What should be included in a binding financial agreement?
A BFA should include details about how the parties’ property and financial resources will be divided in the event of a separation, as well as any other relevant details such as spousal maintenance or superannuation entitlements.
Article S0urce: Binding Financial Agreement in Brisbane
