A binding financial agreement or BFA (also known as a ‘prenup’ or ‘prenuptial agreement’ in the US) is a contract held between a couple in a married or de facto relationship that typically defines the rights of each party over shared assets. Usually, a BFA outlines the rights that each party acquires upon marriage or upon entering into de facto relationship and what might happen to the parties’ rights and assets in the event that the relationship ends in divorce or final separation. BFAs can be established before, during, or after the commencement of a relationship.
Asking your partner to enter into a BFA with you can be a difficult conversation to have and as BFAs are often very complex with strict legal requirements, you will require legal advice to ensure that yours can be relied upon.
So why are some of Australia’s major family law firms reporting huge increases in BFA requests in recent years?
Divorce rates on the rise
One of the primary drivers of the demand for BFAs is the recent surge in divorces faced by Aussie couples in the wake of the pandemic, with a record-breaking 56,244 divorces finalised in 2021 according to the Bureau of Statistics. Naturally, these figures have alerted many couples to the confronting reality that divorce, or separation are real possibilities, no matter how unexpected and should be accounted for in order to avoid a messy and expensive dispute, in the event of a relationship breakdown.
Another reason for the growing popularity of BFAs can be attributed to the continuing rise in cost of living and particularly property prices felt by couples across the country in 2024. For many Australians, asset security is now more important than ever and as a result, couples often reach a mutual understanding that a BFA can safeguard both parties’ financial interests in the event the relationship breaks down.
How do BFAs work?
BFAs are designed to save considerable legal costs by pre-emptively resolving disputes that might arise if a relationship breaks down. By offering a predictable and amicable resolution method, they can also help preserve relationships between separated parties, reducing the emotional and financial stress associated with lengthy court battles. The existence of a BFA also often provided certainty and peace of mind, even if a couple never needs to rely on their BFA, as they can be useful in for clarifying each parties’ rights, removing uncertainty and providing stability.
One caveat of relying on a BFA is that couples’ circumstances often change from the time the BFA is written to the time of divorce or separation and could be rendered ineffective if their BFA isn’t updated to reflect such changes. Most commonly, a BFA may not be enforceable if it does not provide for what happens if;
- the couple has children;
- the couple makes a joint purchase of property;
- the couple start a business together;
- the assets or contributions (financial or otherwise) of one or more parties changes beyond the scope of what was initially considered in the BFA, for example, if one party falls ill or wins the lottery.
Because of these potential risks, BFAs require competent technical drafting and regular review to be contractually binding. To that end, it is common for couples to seek legal advice when preparing their BFA or when reviewing a pre-existing BFA held between them.
How we can help
We understand that for many couples, the topic of signing a BFA can be a sensitive one. If you and your partner are considering entering into a BFA or are seeking advice in relation to an existing one, our experienced team of family lawyers are ready to provide you with strategic, emotionally considerate and proactive advice. As Australia’s leading LGBTQ+ firm, we welcome all clients, relationships and families, and have had decades of experience providing our services across a diverse clientele.
