When we think of prenuptial agreements in Australia, we often think of American television; the courtroom drama with the family law attorney arguing over the terms of the ‘prenup.’
We often think of how offended one’s prospective spouse might be at the thought that the other does not trust them enough to enter into the marriage without a prenup!
The reality is, however, that we don’t technically have prenuptial agreements in Australia; but we do have what are known as Binding Financial Agreements (or BFAs).
What is a Binding Financial Agreement?
Briefly, and put simply, a Binding Financial Agreement is an agreement or contract which determines how assets are divided between the parties in the event that the relationship ends. Or, as the Sydney Morning Herald recently described it:
‘In Australia a pre-nup is simply a binding financial agreement that sits under the Family Law Act. It’s a legal contract that can be entered into by married couples, same-sex couples and those in de facto relationships… an agreement between both parties that requires full disclosure of their financial position and assets at the time, and is designed to provide certainty to both parties before entering into marriage or a long-term relationship.’
Binding Financial Agreements are dealt with in Part VIIIA of the Family Law Act (Cth) 1975.
There are, broadly speaking, three kinds of BFA:
1. Binding Financial Agreements before marriage (this would be the equivalent of ‘a prenup’);
2. Binding Financial Agreements during marriage; and
3. Binding Financial Agreements after divorce.
Despite the confusion around the terminology, prenuptial agreements or Binding Financial Agreements are not just for Hollywood movie stars or American courtroom dramas. A list of the advantages of Binding Financial Agreements can be found here.