Can I protect my assets before marriage?

Binding Financial Agreements explained

Many people enter into marriage hoping it will last forever. However, given the financial and emotional consequences that can arise if a relationship breaks down, some couples choose to consider their financial arrangements before they marry.

A Binding Financial Agreement ("BFA"), sometimes referred to as a "pre-nuptial agreement" or "prenup", is a legal agreement that allows couples to decide how their property and financial resources will be dealt with if their relationship ends.

What is a Binding Financial Agreement?

A Binding Financial Agreement is an agreement made under the Family Law Act 1975 between:

• couples who are considering entering into a relationship or marriage;
• married couples; or
• de facto couples.

The agreement can set out how property, financial resources and liabilities will be dealt with if the relationship breaks down.

A BFA can address issues including:

• ownership of property acquired before or during the relationship;
• treatment of inheritances or family gifts;
• division of assets after separation;
• responsibility for liabilities;
• protection of business interests; and
• spousal maintenance arrangements.

Why do people enter into financial agreements?

There are many reasons why couples choose to enter into a BFA.

Common circumstances include where one party:

• has significant assets before entering the relationship;
• owns a business;
• expects to receive an inheritance;
• has children from a previous relationship and wishes to protect assets for those children;
• wishes to clarify financial expectations before marriage; or
• wants certainty about how property will be divided if the relationship ends.

A BFA can provide couples with greater certainty and may reduce the likelihood of future disputes if separation occurs.

Can a financial agreement protect assets I already own?

A BFA can address assets acquired before the relationship, including:

• real estate;
• savings;
• investments;
• businesses;
• trusts; and
• other valuable assets.

However, entering into a BFA does not mean that one party automatically keeps everything they brought into the relationship.

The agreement must comply with the requirements of the Family Law Act and should clearly set out how assets will be treated in the event of separation.

Are Binding Financial Agreements automatically enforceable?

No. Strict legal requirements must be satisfied for a BFA to be binding.

Each party must obtain independent legal advice from a qualified lawyer. The lawyer must advise the party about:

• the effect of the agreement; and
• the advantages and disadvantages of entering into the agreement.

The lawyers must provide signed statements confirming that this advice has been given.

If these requirements are not followed, the agreement may be vulnerable to challenge.

When should a financial agreement be made?

A common misconception is that a BFA should be signed shortly before the wedding.

While this may be possible, it is generally preferable for agreements to be prepared and signed well before the marriage.

A BFA should not be entered into:

• under pressure;
• immediately before the wedding;
• without sufficient time to obtain legal advice; or
• where one party feels they have no genuine choice.

An agreement entered into in circumstances involving pressure or unfairness may be challenged.

Can a financial agreement be challenged?

Although BFAs are intended to provide certainty, they are not immune from challenge.

A Court may set aside an agreement in certain circumstances, including where:

• there has been fraud or non-disclosure;
• the agreement was obtained by duress or undue influence;
• the agreement is otherwise legally defective; or
• circumstances arise that make the agreement impracticable or unjust.

For this reason, careful drafting and proper legal advice are essential.

This article is general information only and does not constitute legal advice. Every matter is different — speak with one of our family lawyers about your specific circumstances.

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