When a married or de facto couple have separated and they want to formalise property and/or spousal maintenance agreements without having to go through the Courts, they can do this by entering into a Binding Financial Agreement (BFA) or by making an application to the Court for Consent Orders.
A BFA can also be used to reach an agreement before a relationship starts (which is known in some countries as a prenup) or even during the relationship, as to how assets will be divided in the future.
If parenting arrangements need to be formalised, this cannot be done in a BFA. Any arrangement reached between you and your former partner or spouse can be set out in Consent Orders.
In this article, we explore the characteristics of a BFA and Consent Orders, the differences between each of these options as well as when they might be appropriate.
What is a Binding Financial Agreement (BFA)?
A BFA is a contract between you and your spouse or partner that can cover issues to do with property and/or spousal maintenance agreements. It is a way for couples to keep their matter out of Court, especially given that a Court will not review or consider a BFA.
By entering into this type of financial agreement, you have control, rather than a Court deciding how the assets, liabilities, superannuation and financial resources of the relationship will be divided, as well as making decisions regarding spousal maintenance (if any). It also means that a Court will not assess whether the BFA is just and equitable according to family law, unless Court proceedings are commenced to enforce or set aside the BFA. There are limited circumstance in which a Court will set aside a BFA, one commonly being where the other person has hidden assets or lied about their value or otherwise where there has been a fraud.
It is also important to note that anyone entering into a BFA should obtain separate legal advice on how the BFA will impact you, in addition to the advantages and disadvantages of entering into this type of agreement.
In circumstances where a BFA is being used before the relationship starts or during it, it would cover the financial arrangements that you and your partner or spouse want if your relationship ends. In these instances, a BFA can assist to protect assets that you want to retain for either yourself or your children from a previous relationship. Of course, it can often be difficult to have these discussions with your partner or spouse, so it’s important to approach the subject carefully so as to not cause harm or place strain on your relationship.
If you wish to enter into a BFA before or during a relationship, it is important to note that challenges may arise in the future from this type of agreement being made, which can include:
- Possible difficulties arising for the party with less financial resources to get out of this contract if they suffer any unforeseen financial hardship in the future, particularly where there are no children involved.
- It can be difficult for the financially stronger party, attempting to protect their interests or assets, if children are born following the initial drafting of a BFA, which will mean you may need to consider that a BFA may need to be terminated and new BFA entered into. Otherwise, there is at risk of it being set aside by a Court due to the children being considered a change in circumstances.
In circumstances where the terms of the BFA have not been complied with, the party seeking to enforce the BFA can apply to the Court.
What are Consent Orders?
An Application for Consent Orders is a means by which a former couple, having reached an agreement about parenting arrangements, financial and/or property settlements, and/or spousal maintenance, can make an application to the Court to formalise their agreement into Court Orders.
Unlike a BFA, an Application for Consent Orders requires parties to complete a Court form and prepare a document setting out the Orders they want the Court to make. The Court form includes:
- All the financial information of the parties, enabling the Court to determine if the orders are just and equitable.
- The parenting arrangements proposed by the parties and including details of the child. Additional information will also need to be filed regarding any allegations of child abuse, family violence and risk. This is to allow the Court to determine if the arrangement is in the best interests of the Child or Children.
If a Court requires further clarification about the Orders, they will go back to the parties with specific questions so that they can be satisfied that the Orders are appropriate before signing off on them. For property / financial matters, the application for Consent Orders must be made within either:
- One (1) year, for married couples, from the date of a divorce order being made final; or
- Two (2) years, for de facto couples, from the date of separation.
If you are out of time, you will have to make a special application to the Court for what is called leave to proceed out of time. This is a costly and time consuming process. There is no guarantee that this application will be granted by the Court and the result may be that you have no entitlement to a property settlement and/or spousal maintenance.
How do you know which document is right for your situation?
As can be seen from the above, each document has its own characteristics that make it suitable in different circumstances.
It is suggested that you obtain legal advice prior to formalising any agreement reached to ensure that:
- your rights are properly protected;
- you are not entering into an agreement that is detrimental to you; and
- you are formalising your agreement in the most efficient and effective manner.
Disclaimer: The content of this article is intended as a general guide to the subject matter. For specific legal advice about your individual circumstances, please contact our experienced lawyer