What Makes a Binding Financial Agreement Valid in Victoria?
Protecting your financial interests before, during or after a relationship is a prudent step many Australians take. In Victoria, Binding Financial Agreements (BFAs) provide a legal framework for couples to determine how their assets will be divided if their relationship ends. These agreements can be created before marriage (prenuptial), after marriage (postnuptial), or for de facto relationships. Eliza Legal Family Lawyers Frankston can help you navigate this complex legal area with confidence.
Key Takeaways
- Valid BFAs require independent legal advice for both parties with signed certificates
- Full financial disclosure is mandatory for a BFA to be considered valid
- Both parties must enter the agreement voluntarily without coercion or duress
- The document must be properly written, signed, and witnessed to be legally binding
- Courts can set aside BFAs if they fail to meet strict legal requirements
What is a Binding Financial Agreement in Victoria?
Definition and purpose
A Binding Financial Agreement is a legally binding document that outlines how a couple’s financial assets will be divided if their relationship breaks down. It can cover property, financial resources, and spousal maintenance. However, BFAs cannot make determinations about child custody, parenting arrangements, or child support – these remain within the court’s jurisdiction.
Types of BFAs relevant to Victoria
Under federal family law, Victorians can create three main types of BFAs:
- Pre-marriage agreements (Section 90B)
- During-marriage agreements (Section 90C)
- After-marriage agreements (Section 90D)
- De facto relationship agreements (Sections 90UB, 90UC and 90UD)
How BFAs differ from consent orders and court settlements
Unlike consent orders, BFAs don’t require court approval. This provides greater privacy but less security. Court settlements occur after relationship breakdown and are supervised by the court, while BFAs can be created at any time and remain private unless challenged.
Core Legal Requirements for a Valid BFA in Victoria
Written document and signatures
The Family Law Act requires BFAs to be in writing and signed by both parties. The document must be properly executed with signatures from both parties and any required attachments must be included.
Independent legal advice and certificates
Each party must receive independent legal advice about how the agreement affects their rights and the advantages and disadvantages of entering into it. The advising lawyer must provide a signed certificate confirming this advice was given.
“We see many BFAs challenged because one party didn’t receive proper independent legal advice. This is why we always emphasise the importance of both parties having their own qualified lawyer review the agreement thoroughly.” – Eliza Legal
Full and frank financial disclosure
Both parties must provide complete disclosure of all assets, liabilities, and financial resources. Hiding assets or providing misleading information can render the agreement invalid and potentially lead to it being set aside by a court.
Capacity and voluntary consent
Both parties must have the mental capacity to understand the nature and effect of the agreement. The agreement must be entered into voluntarily, without duress, undue influence, or coercion. Signing under pressure or threat can invalidate a BFA.
No unlawful purpose or fraud
BFAs created to defraud creditors or for other unlawful purposes will be void. The court will not uphold agreements made with fraudulent intent or to circumvent legal obligations.
Required Content and Structure of a BFA
Parties and background details
The agreement must correctly identify all parties involved, include relevant dates, and accurately state the relationship status. Any errors in these fundamental details could affect the validity of the document.
Comprehensive list of assets, liabilities and superannuation
A valid BFA should include detailed schedules of all assets and liabilities, including current values and how they were determined. Superannuation interests must be specifically addressed, as they’re treated differently under Australian family law.
Clear property and financial division terms
The agreement must specify exactly how property, financial resources, and liabilities will be divided if the relationship ends. Ambiguous terms can lead to disputes and potentially render the agreement unenforceable.
Attachment of independent legal advice certificates
Certificates from each party’s lawyer confirming independent legal advice must be attached to the agreement. These certificates are typically included as annexures to the main document.
Execution and witness clauses
The agreement should include clear execution clauses and be properly witnessed according to legal requirements. A detailed execution checklist provided by your lawyer helps guarantee compliance.
Common Grounds for Setting Aside or Invalidating a BFA
Courts may set aside BFAs on several grounds, including:
Non-disclosure or misleading disclosure of finances
Failing to disclose significant assets or providing misleading information about financial circumstances can result in the agreement being set aside.
Undue influence, coercion or duress
If one party was forced or pressured into signing the agreement, it may be invalidated. This includes psychological pressure, threats, or ultimatums.
Unconscionable conduct and unfairness
Courts may set aside agreements that are grossly unfair or where one party has taken advantage of the other’s special disadvantage or vulnerability.
Lack of capacity or mental impairment
If one party lacked the mental capacity to understand the agreement due to illness, disability, or other factors, the agreement may be invalidated.
Procedural defects
Technical issues such as improper signing, witnessing, or missing legal advice certificates can render a BFA invalid.
Practical Checklist for Drafting and Reviewing a BFA in Victoria
To maximise the likelihood of your BFA being valid:
Engage experienced family law practitioners early
Work with lawyers who specialise in family law and have specific experience with BFAs in Victoria.
Prepare and exchange full financial disclosure documents
Create comprehensive lists of all assets, liabilities, and financial resources, with supporting documentation.
Obtain and attach independent legal advice certificates
Each party should have their own lawyer who provides a signed certificate confirming appropriate advice was given.
Include clear schedules and valuation dates
Detailed schedules with accurate valuations and dates help prevent future disputes about what was included in the agreement.
Keep contemporaneous records
Maintain records of all meetings, instructions, and advice related to the creation of the BFA to help defend against future challenges.
Frequently Asked Questions
Can a BFA cover parenting arrangements?
No, BFAs cannot make binding determinations about child custody or parenting arrangements. These matters remain within the court’s jurisdiction.
Can a BFA be changed or cancelled?
Yes, parties can mutually agree to terminate a BFA or replace it with a new one, following the same legal requirements as the original agreement.
What happens if one party didn’t get legal advice?
The BFA is likely to be invalid and unenforceable. Independent legal advice for both parties is a fundamental requirement.
How long does a BFA remain effective?
A BFA can remain in effect indefinitely unless it contains a sunset clause, is terminated by mutual agreement, or is set aside by a court.
Conclusion
Creating a valid Binding Financial Agreement in Victoria requires careful attention to legal requirements and procedural details. The key elements include proper written documentation, complete financial disclosure, independent legal advice with certificates, voluntary consent, and proper execution. If you’re considering a BFA, it’s essential to work with qualified legal professionals who understand the complexities of these agreements. Eliza Legal provides expert guidance on BFAs and can help ensure your agreement meets all legal requirements for validity and enforceability. Contact a specialist family lawyer today to start the process with confidence.
