Pocket Guide to Binding Financial Agreements
Binding financial agreements (BFAs) are a great way to divide property. Here’s how to get a BFA and potential challenges.
Quick summary
- A BFA is a settlement option with strict rules.
- Private discussions or mediation can help you agree.
- Find the right family lawyer.
- Disclosure involves many factors.
- There are reasons to challenge an agreement.
- There’s a court process to set aside an invalid agreement.
What is a Binding Financial Agreement?
Binding financial agreements allow parties to divide their property outside of the Family Court. Binding financial agreements are more flexible than a court order. They’re binding once the parties meet the following:
- Both parties enter into the agreement without pressure or duress.
- Both parties fully disclose their finances.
- Each party gets independent legal advice from a family lawyer.
- Both parties get an Independent Solicitors Certificate.
Timeframe
When can you enter a BFA? That’s one of its benefits. You don’t need to wait until you separate as you would with a consent order. You can make a financial agreement during or after a relationship. You just need to begin the agreement within a year of your divorce.
Agreeing
Parties may not agree on the property division. This can be overcome.
What are the issues?
What do you disagree about specifically? Make a list. This will help discussions be more productive. Some of these issues may be complex. Break them down into smaller parts.
How to resolve the impasse
There are many ways to resolve an impasse.
Private discussion
A private discussion can be useful. You need to communicate well. Consider this option if you’re on good terms with your former partner. You can avoid a family lawyer or professional mediator. Focus on the specific issues. You’ll keep the discussion on track. Make sure both of you have your say and be heard.
Mediation
If you need more structure, a professional mediator can help. A mediator will create a neutral and non-judgmental space. This is crucial to the discussion. If a party is uncomfortable, they mightn’t advocate for themselves as effectively. The discussion stays productive and respectful. Over 80% of mediation cases succeed.
Find the right family lawyer
Legal advice is a key part of the BFA process. Finding the right lawyer can be the difference between a good agreement and one that can be challenged in Court. What to look for in a lawyer?
Financial knowledge
Family lawyers deal with financial arrangements involving many types of asset pools. Property pools can be easy to account for and divide. They can also be large and complex, involving trusts and business interests. Make sure your lawyer has experience with the finances your BFA will cover.
Professional connections
BFAs often involve professionals other than your lawyer. You may need to engage a specialist valuer, accountant, financial adviser, etc. A family lawyer will have access to trusted professionals who can help.
Clear fees
Lawyers should tell clients exactly how much an agreement will cost. If a lawyer can’t quote a price for their services, move on.
Communication skills
Like all areas of law, family law has its own language. It can be overwhelming for a client to face the law process when they don’t understand what’s involved. A good lawyer speaks in plain language. They don’t use legal jargon and keep the client informed of their position and what’s required.
Financial disclosure
Full financial disclosure is required before assets can be divided. If the disclosure process isn’t done properly the binding financial agreements may be void. There are several things to consider.
Collect the information
Binding financial agreements cover the net property pool. That means assets and liabilities must be accounted for. These can include:
- Bank accounts
- Share portfolios
- Superannuation
- Credit card debt
- Personal loans
- Real estate
Valuations
Get accurate valuations of the assets and debts to find the total net value of the asset pool.
Superannuation
Superannuation interests are a common asset in financial agreements. The process for getting a correct valuation is set out in superannuation splitting laws. The required documentation includes:
- A Form 6 Declaration. This form shows you have the right to request information on the superannuation interest.
- A Superannuation Information Request form. This document outlines what information you’re asking for from the trustee.
Some trustees charge a fee for a valuation.
Specialist valuations
Some assets require a specialist to be valued properly. Such assets may include fine art and collectibles. Valuations assess the asset’s significance. This includes its condition, rarity and cultural importance.
Business valuation
Business valuations can be tricky during a divorce. Out-of-court valuations by collaboration save parties money. A professional valuer will find a fair market value for the business based on various factors. These include:
- Assets and liabilities.
- Profitability.
- Client base.
- Business forecast.
Challenging a BFA
There are reasons why a party may want to challenge a binding financial agreements after a settlement.
Undue influence
Parties must enter into the agreement of their own free will. Property matters often involve spouses with unequal access to financial resources. This can mean one party feels they’re being forced into agreeing to a poor settlement.
Non-disclosure
One party may not disclose correctly. In extreme cases, this can be illegal. There are several ways a party can hide their disclosure.
- Transferring assets. Assets may be transferred to a third party temporarily to avoid including them in a binding financial agreements.
- Undervaluation. Some assets may be undervalued. For example, a party may get biased valuations of real estate or businesses.
- Hidden accounts. Money may be held in new accounts in places that are hard to get to.
- Deferring income. One party may choose to delay payment of a bonus or other income to stop it from being included in the asset pool.
How to Apply to Set Aside a BFA in Family Court
Here’s how you apply to the Family Court to have a financial agreement set aside.
Get legal advice
Financial matters in family law are tricky. Your first step should be to get professional legal advice. A family lawyer will determine if there are grounds to challenge the agreement.
Apply to the Court
If there are grounds, apply to the Court to have the agreement voided. The application must outline why the agreement should be set aside.
Collect evidence
The grounds for setting an agreement aside must be supported by evidence. This can be:
- Financial records.
- Correspondence between the parties.
- Evidence of fraud or duress.
Serve the other party
The other party should know about the proceeding. Serve them with the application. A process server can do this for you. Alternatively, you can ask a friend or family member over 18. Service allows the other party to respond to the application if they want to.
Mediation
We recommend the parties mediate if possible. There’s always a chance an agreement can be reached outside of court and save everyone time and money.
Hearing
If mediation doesn’t work, you’ll go to court. Each party will present their case with evidence. The Court decides based on the evidence.
Conclusion
A binding financial agreement provides a safe and secure way to split assets. A binding financial agreements protect each spouse’s property interests if all the legal requirements are met. There are circumstances where a BFA can be challenged and set aside. If a party wants an agreement voided, a family lawyer can help them through the court process.
I was very happy with my experience at Shanahan Family Law. Danyelle guided me through the property settlement and a satisfactory outcome was reached. This was achieved without going to mediation or court.
We can help with your property matters. Contact us today.