Understanding the Importance of Binding Financial Agreements in Relationships

As in any other kind of close relationship, be it a marriage or a de facto relationship, it is never easy to talk about money.

But spending expectations should be discussed directly and openly, and thus it is essential to pay much attention to the aspect of financial planning.

One of the formalities that can be taken to frame these discourses is the Binding Financial Agreement (BFA).

A BFA is a legal agreement that will govern the division of property and debts that a couple has acquired over the course of their relationship in the instance of a separation or divorce.

Knowledge concerning the role of BFA can help achieve a certain level of comfort and stability for both partners – therefore, it’s another powerful instrument in a couple’s hands.

 

What is a Binding Financial Agreement?

 

A Binding Financial Agreement is thus similar to a pre-nuptial agreement or post-nuptial agreement inasmuch as it is an agreement between two parties in a relationship regarding their finances in the event that the relationship will be dissolved.

BFAs can be entered into at any stage of the relationship: They may be made and signed prior to the commencement of marriage or registration of a de facto relationship (referred to as a prenuptial agreement), while the relationship is ongoing or after the parties have decided to live apart.

While marriage provides protection primarily to women, entails the minimum amount of financial stress, and shields from having to manage a domestic commune, the primary purpose of a BFA is to minimize insecurity and upset in the family business after dissolution of marriage.

With a BFA in place, couples map out on the division of their property, thus avoiding the use of legal system that is known to be very costly, time wasting and unpredictable.

 

Why Consider a Binding Financial Agreement?

 

•       Protection of Assets: On of the biggest benefits of a BFA is that it provides each party with protection of their property. In as much as it is property, investment or inheritance, a BFA enables individuals to protect their property from being divided in a way that they will not agree. This is especially true where there are large number of assets or one of the partners has been married before and has children for whom they would like to plan to protect their inheritance.
•       Clarity and Certainty: MAGER Spring 2013.com A BFA gives both parties’ certainty of which assets and liabilities will be allocated, thus lowering the risk for legal battles. Such clarity can so avoid misconceptions especially in as much as the financial aspects of the relationship between the two parties is concerned. This is particularly useful in the cases where one of the spouses has more considerable financial capabilities than the other.
•       Minimizing Conflict: Saying good bye is never easy and most often than not happens at the end of a relationship period. The recommendation to have a BFA spells out this division of assets in advance and therefore, could go a long way in preventing any skirmishes. This can ease pressure and psychological cost involved in the separation process making it easier for both parties to connect.
•       Flexibility: A BFA is flexible and can be done in such a way that it will fit into the life of the couple. It can encompass a lot of aspects of the financial issues of the marriage, such as division of assets, maintenance, and even superannuation. This flexibility ensures that the couples get to agree on a format of the agreement that they prefer most.
•       Avoiding Costly Legal Battles: This must be one of the greatest advantages of a BFA: there is no need to spend a lot of time and money on protracted and costly legal processes. Litigation is expensive and time consuming in terms of the financial aspect, the mental and legal processes that are involved. In essence, disputed issues of financial nature can be tended through BFA without having to go to court and this is due to the privacy of couples.

 

Legal Considerations

 

There are certain legal requisites that a Binding Financial Agreement must satisfy if it is going to be binding in accordance with the provisions of the Family Law Act.

It is mandatory for both parties to seek the assistance of an attorney in the preparation of the agreement so that each of them is in a position to fully appreciate the terms of the agreement they are about to enter into.

There is also requirement that the agreement be in writing and that the signatories to the agreement are the two parties.

The above requirements if not fulfilled can make the BFA non-actionable in the courts of law.

It should also be mentioned that, nevertheless a BFA offers a good deal of protection, it can be contested in some situations.

For instance if one party can provide evidence that the agreement was executed under pressure or that it is unfavourable then the agreement would be voidable.

 

Conclusion

 

Lastly, let me state that this legal instrument known as Binding Financial Agreement is a great tool that can serviced and give couples a legal guarantee.

BFA can serve as a framework for cómoings and separation since it details how the assets and liabilities will be split thus reduces instances of a war over assets, protects the shared property, and reduces a break-up’s impact emotionally, and financially.

Now, let it not be seen as the couples are not wise to come up with this strategy for the financial security of the two parties as it may not be the most romantic of topics to discuss.