27 Sep Binding Financial Agreements – Why you need a Lawyer to do one
Binding Financial Agreements – Why you need a Lawyer to do one
Binding Financial Agreements (BFA’s) are amongst the most complex documents a family lawyer will draft during their career. Each BFA also comes with significant risks to the lawyer. In the event a BFA is challenged in Court proceedings, it will undergo significant scrutiny and if not drafted or executed correctly there can be serious consequences for the practitioners that put together its content. For that reason, many lawyers in this field will not even take them on.
Clients often call us and say “we agree on how we will split everything and we are just going to sign the agreement” or “we just need you to sign as lawyer, but we don’t want any advice”.
What most people don’t realize is that for a BFA to be in fact “binding” under the Family Law Act, it requires a lawyer to certify that they have given advice to their client with respect to:
- The effect of the Agreement on that person’s rights; and
- The advantages and disadvantages of making the Agreement.
Without this advice, the Agreement is not valid even if it is duly signed by all parties involved. Yes, that’s right. Even if your ex-partner or spouse signs the agreement, it will not be sufficient for the agreement to be binding, which means if they renege or don’t comply with it, there is not much that you can do to uphold it.
Each party needs to obtain their independent legal advice and obtain a certificate from their lawyer that they have in fact received the advice. Until such time as the Agreement is signed and contains a Certificate of Independent Legal Advice for each party to the Agreement, it will not be a binding agreement under the Family Law Act.
The consequences of not having a binding agreement can be very serious and expensive to rectify if issues arise. Some of the consequences could be:
- If your ex decides that they are no longer wanting to settle on the agreed terms, they might try and re-negotiate different terms or take the matter through the courts to be determined;
- If your agreement provides, for example, for a jointly owned property to be transferred into your name, you will not be able to claim the marriage rollover relief, which will mean that your transfer will come along a hefty stamp duty bill from the ATO;
- The agreement will not actually sever and finalize your financial relationship with your ex, which could mean that even months or year down the track, they might be able to come back for a second bite of the cherry and there is nothing to legally prevent them from doing so!
Bottom line, BFA’s are very tricky and can cause a lot of trouble, in some cases, even years after they are entered into. At Fedorov Lawyers, we are well-equipped to assist in ensuring that your BFA reflects what you have agreed upon and that it will legally protect and enforce your rights.