Understanding Binding Financial Agreements
Entering into a relationship or partnership is typically filled with dreams and excitement, not thoughts of break-ups or disputes. But, as life goes, unforeseen circumstances can arise.
And just like a relationship, the same goes for a business partner. When business partners are on the same page, things can be absolutely amazing. Cash is flowing, business is growing, and you’re both reaching goals you’ve only dreamed about. But, again, just like relationships – business partners can disagree, things can get complicated, and might experience their own kind of breakup.
But then what happens to all the accumulation of assets, liabilities, and financial resources? It’s crucial to safeguard your assets, even amidst the rose-coloured glasses of love or partnership.
This is where a Binding Financial Agreement comes into play – your shield in times of life’s uncertainties.
What exactly is a Binding Financial Agreement (BFA)?
A BFA is a legal document outlining the division of assets, liabilities, and financial resources in case of a relationship breakdown, such as divorce or dissolution. Typically considered by married couples, de facto partners, or those contemplating cohabitation, BFAs offer a roadmap for navigating choppy financial waters.
They’re legally binding documents, so they can be upheld in court if necessary.
Why are BFAs vital?
They provide clarity and certainty in uncertain times, helping to avoid messy disputes and costly legal battles by clearly delineating financial responsibilities and asset division.
Let’s walk through the key components of a BFA —
Financial Disclosure – Both parties must openly disclose their financial situations, including assets, income, debts, and liabilities. This ensures that the agreement is both fair and equitable to both parties.
Independent Legal Advice – Seek advice from separate legal advisors to understand your rights and obligations, ensuring the agreement is entered into voluntarily and is legally binding.
Legal Requirements – A Binding Financial Agreement must meet specific legal criteria, including being in writing, signed by both parties, and accompanied by certificates of independent legal advice.
Scope – BFAs can cover various financial matters, from property division to spousal maintenance, offering flexibility in different relationship and partnership stages.
As Binding Financial Agreements can be complex in nature as well as their legal implications, it’s essential to seek advice from a qualified lawyer before entering into an agreement. They can offer personalised guidance based on your individual circumstances, ensuring that your rights are protected and that the agreement is fair and enforceable.
There are circumstances in which they can be reviewed though, such as if the BFA wasn’t entered into voluntarily or there has been a material change in circumstances since the agreement was made.
Those changes can include:
Substantial Increases or Decreases in Assets or Income – Such as receiving an inheritance, losing a job, or experiencing a substantial change in business profitability.
Changes in Financial Needs or Obligations – Such as unexpected medical expenses, educational costs for children, or caring responsibilities for elderly relatives.
Changes in Relationship Status – Such as one party entering into a new relationship, getting married, or having children with another partner.
Misrepresentation or Fraud – Such as one party discovering that the other party misrepresented their financial circumstances or engaged in fraudulent behaviour when entering into the BFA.
Significant Changes in Property Value – Such as material fluctuations in the value of assets or property included in the BFA, like real estate, investments, or business interests.
Unforeseen Legal Developments – Such as changes in legislation or legal precedents related to family law or contract law.
Health Issues or Disability – Such as if one partner experiences a serious illness, disability, or incapacity that affects their ability to work or earn income
Relocation or Change in Circumstances of Children – Such as relocation, changes in custody arrangements, or educational needs.
Knowledge is so key in protecting your hard-earned wealth, however that may look like. Be sure to arm yourself with information and seek out professional advice when needed so that you can make informed decisions on your financial future and protect yourself against unforeseen circumstances.
