How Does A Binding Financial Agreement Work?

Life is uncertain and by being realistic about it and planning before a problem occurs; you can avoid a lot of issues in the future. Binding financial agreements are those contracts which are made before, during or after the course of a relationship. It is based on the planning of finances and asset division if the relationship falls apart.

These agreements are made between people before, during, or after a de facto relationship or marriage; the de facto couples can be of same or opposite sex. Although a lot of people frown upon such agreements; they may save you from a lot of legal troubles.

Types of BFA

There are five types of BFA in all, which include: Prenuptial Agreement, Postnuptial Agreement, Cohabitation Agreement, Separation Agreement, and Divorce Agreement. These are applicable, depending on the type of relationship you are involved in. Prenuptial and Postnuptial Agreements are for married or intending to marry couples, whereas Cohabitation Contracts are for de facto couples who live together or are intending to engage in a live in relationship.

The Separation Agreement is for both married and de facto relationships who want to break up and live independently; whereas  Divorce Agreements are made between divorced couples for property settlements. The Family Law Act 1975 covers BFA and the agreements and sections are similar for same and opposite sex couples.

Criteria for a De Facto Relationship

It is easier to settle things in marriage, as marriage itself requires legal documentation but when it comes to de facto relationships, a criterion has been set by the Family Law Act. De facto relationships are those in which couples, of the same or opposite sex, who are not bounded by matrimony, live together domestically. At least one of the following conditions should be satisfied, for a couple to be counted within the de facto category:

  • Living together as a couple for a minimum of two years.
  • Having a child together.
  • Registered as a de facto couple within a state or territory law.

When Should You Consider BFA?

The decision about BFA should be made hurriedly and requires two experienced and separate family lawyers. Also, BFA might not ideal be for a person who is entering in the institute of marriage for the first time and doesn’t have any such properties that need protection. Couples should opt for BFA only if one of the following is true for either of them.

  • If either of them have been divorced or separated in the past.
  • If one of them owns a real state or has significant financial property.
  • Provided that one of them have or will receive major inheritance or gift from their parents.
  • Have children with a previous partner.
  • When one of them is a receiver of their parents’ trust.
  • In case either of them has a high income
  • If they have made an agreement about asset division in case of separation.
  • If financial investment has been done by one of the partners on a property, and leaving it undocumented will be unjust to them.

BFA binds two people together legally if the agreement is signed, proper advice was given to the accepting party prior to signing, and all properties, incomes, debts, and resources were disclosed beforehand. When living with an unreliable or new partner, it is always better to be safe than sorry and to secure your finances legally.