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Binding Financial Agreement and Consent Orders

When ending a relationship via separation or divorce people can agree to a property settlement to separate their assets. This is usually done via agreement or through mediation with a family lawyer, who can draft an agreement.

There are two options available to make that agreement binding:

  • A Binding Financial Agreement; or
  • consent Orders.

A Binding Financial Agreement (BFA) is a binding and enforceable contract between the parties. It can only deal with financial or property matters it excludes children and custody matters. It can be entered into at any time during a relationship such as before living together, during cohabitation, during a marriage, after separation, or after divorce. Whereas, Consent Orders need to be finalised by the Court and can deal with parenting matters also.

What you should consider when dividing assets?

When looking at dividing your assets there are many factors to consider. This includes:

  • what assets are being divided;
  • who brought certain assets into the relationship;
  • who cared for the family during the relationship;
  • what each party is earning at the time of separation and what their future earning capacity is; and
  • what arrangements are in place for any children.

What is a binding financial agreement?

A BFA is an agreement that clearly sets out the details of a property settlement and how you are dividing your assets. This includes a brief background of the relationship, assets that each party had prior to the relationship, assets the parties acquired during the relationship and what assets will be retained by either party now that the relationship has ended.

It is essential that a BFA is properly drafted to clearly set out what each party receives in the settlement including any payments of spousal maintenance. A poorly drafted BFA can result in the BFA being held to be unenforceable by the Court.

Advantages of a Binding Financial Agreement

  • Drafting a BFA is at the discretion of the parties and is therefore more time efficient.
  • The parties can divide the assets in a manner which suits them and the agreement can still be binding (as long as both parties receive independent legal advice in relation to the BFA). In contrast, Consent Orders will be considered by the Court and considered to be fair and equitable for the orders to be made.
  • Can be entered into at any time during a relationship (before living together, during cohabitation, during a marriage, after separation, or after divorce).

Disadvantages of a Binding Financial Agreement

  • Both parties must obtain their own independent legal advice. Their solicitor must clearly explain the advantages and disadvantages of the party signing the Binding Financial Agreement. Your family lawyer must also sign a declaration within the BFA that this advice was given. If one party did not obtain independent legal advice then the BFA can be held to be unenforceable.
  • A BFA can be found to be unenforceable if poorly drafted or if it was entered into under duress.
  • Any ambiguous terms can be interpreted to favour the party that did not draft the BFA.
  • An application to the Court to enforce a BFA is more complicated as the Court will need to determine that the BFA is both valid and enforceable.

 

Many people who are separating or divorcing amicably will be able to enter into a binding financial agreement. It is important that it is carefully drafted and considered so that if one party changes their mind it will be upheld. They are complex documents and the matters agreed to therein will be an enforceable agreement as a general rule.

Like all legal documents, if they are not drafted correctly, they can be challenged if a dispute arises. Our lawyers ensure that the legal documentation that we prepare is going to stand the scrutiny of Court and that the terms are clear and concise.

For many people they may have limited exposure to how property settlements are negotiated and resolved. A family lawyer will be integral in giving you legal advice on a binding financial agreement or property settlement as pull on their extensive litigation experience to guide you in what a court may (the authority) see as fair and reasonable.

If you have an issue or query, we can assist by you by developing a clear path of action that works best in your circumstances. This involves many alternative dispute resolution options, negotiation strategy estimating your likelihood of success should court be necessary.

READ MORE on how you can make your Binding Financially Agreement legally binding read about Consent Orders Here.

To speak to a family lawyer about consent orders or binding financial agreements call us on 1300 907 335 or otherwise complete our online enquiry form.

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