Protecting your assets in a relationship
When a marriage or de facto relationship breaks down, the assets owned by the parties whether individually or jointly form part of the total asset pool for property settlement when the parties part ways.
Parties do not enter into a relationship anticipating it will break down or hoping for such. However, it is becoming an increasing concern of individuals entering into marriages and de facto relationships that, should their relationship break down, they risk losing considerable assets such as those they have worked hard for, those that have been gifted by family and, in many circumstances, those that they want to leave to children of a previous relationship.
The use of a Binding Financial Agreement (“BFA”) pursuant to the Family Law Act 1975 (Cth) (the “Act”) has become an increasingly common mechanism for protecting assets in a relationship.
A BFA outlines how property is to be dealt with in the event of relationship breakdown. Under the Act, a BFA can be entered into:
- prior to getting married or entering into a de facto relationship;
- during a marriage or a de facto relationship; or
- post breakdown of marriage or de facto relationship.
A BFA can be drafted in any way such that it is tailored to what you would like to occur in the event of relationship breakdown. It can address all property, both real and personal and both jointly or individually owned, and spousal maintenance.
BFAs are a mechanism often used where one party to the relationship has significantly more assets than the other. In effect, the purpose of a BFA is to deal with assets and waive the rights of the parties under the Act to apply for property settlement orders and/or spousal maintenance in the event of a breakdown of their relationship.
To mitigate the risk of parties to a relationship being taken advantage of, the Act puts in place stringent requirements which must be met in order for a BFA to be binding and valid. These include that:
- both parties have signed the BFA;
- each party obtained and was provided with independent legal advice from a legal practitioner as to the effect of the agreement on the rights of that party and the advantages and disadvantages of the agreement at the time that advice was provided;
- each party either was provided with a signed statement by the legal practitioner stating advice was provided and a copy of that statement was given to the other party; and
- the BFA has not been terminated or set aside by a Court.
It is important to note that the Court has jurisdiction under the Act to set aside a BFA where it would be unfair to enforce it. Examples of when a BFA may be set aside include where there has been:
- unconscionable conduct;
- a material change in circumstances relating to a child;
- a reckless disregard for the interests of the other party or (a) creditor/s;
- an agreement with respect to the splitting of superannuation, where that superannuation is deemed ‘unsplittable’ for the purposes of the Act;
- circumstances have changed such that it is impracticable for the agreement or any part thereof to be carried out; or
- the agreement is void, voidable or unenforceable.
However, if drafted correctly and fairly in the circumstances, and provided parties each obtain appropriate independent legal advice, a BFA can be a very effective tool in protecting your assets from a family law property dispute in the event of relationship breakdown.
If you would like further information or advice regarding the preparation of a BFA for your relationship, or require assistance regarding any other family law matter, please contact our Family Law Team via telephone on (03) 9645 9500 or via email at firstname.lastname@example.org.