The answer to this question is subjective and depends upon your individual circumstances, and whether you have property that you want to safeguard from potential future claims.
If there is little to divide in the property pool, you can simply walk away and get on with the rest of your life. However, a handshake deal like this leaves the door open for a potential claim.
If you’re a couple going through a separation, dividing your property without a legally binding agreement or court order may be putting yourself at significant financial risk.
See more about legally separating by Using a Separation Agreement Template in Australia.
Even if you’re no longer living together, any changes in your financial situation, such as receiving an inheritance, can still be taken into account by the courts if a dispute arises. Keep in mind that parties can contest property matters up to twelve months after divorce (or twenty-four months after separating in a de-facto relationship). If you haven’t dealt with financial settlement in a legally binding fashion, you may find yourself taking on more debt or losing some of the financial gains you’ve made during this period.
The value of a binding financial agreement in terms of cost will depend upon your appetite for risk and whether you are feeling lucky or vulnerable. Most of us insure our house, to protect against potential disaster. In a similar vein, a binding financial agreement serves as a form of insurance, safeguarding all your assets and liabilities.
What Is a Binding Financial Agreement?
A Binding Financial Agreement (BFA) is a legally binding contract made under Australia’s Family Law Act 1975. BFAs can be made before, during, or after a marriage or de facto relationship. In this article, we will focus on BFAs made after separation which are sometimes referred to as a financial separation agreement. This document details how the couple’s assets and liabilities will be divided.
Financial agreements can be informal, with examples as simple as a verbal discussion or letter of intent. However, Australian law will not recognise these handshake deals if a dispute arises. It’s fortunate that creating a binding financial agreement can be relatively simple and cost effective.
In Australia, you can use a separation agreement template to reduce your legal costs. An RP Emery template will provide a legal framework for identifying the property pool and show you how to document the division of your assets and liabilities.
The BFA template includes sections that cover the details of your separation and how you approach decisions like spousal maintenance or dividing superannuation. To ensure your draft agreement is legally binding and enforceable in the family court, each party must receive legal advice from their own independent lawyer before signing the agreement.
Can I use a Free Financial Separation Agreement Template in Australia?
There are currently no free financial separation templates that comply with the Family Law Act of Australia. If a template has not been drafted to comply with our laws and a dispute arises, the court will set aside the agreement, and it will play no role in the court’s final decision.
However, low-cost agreement templates do exist in Australia. RP Emery offers DIY separation agreements for under two hundred dollars, providing the structure and information that would cost you thousands of dollars if drafted by your lawyer.
To ensure your template becomes binding, however, you must still seek independent legal advice. You can do this affordably by purchasing legal review packages. RP Emery will assess the draft you create and offer access to lawyers so that both parties may be properly informed of their advantages and disadvantages under the agreement. By providing this advice, and certificates as evidence of the conversation, they ensure the agreement complies with the Family Law Act.
What advice are the lawyers required to provide?
Your lawyer must inform you about your rights before you sign the agreement and explain how those rights will be impacted under the law after signing the agreement.
Your lawyer must also advise you about the advantages and disadvantages, at the time the advice is given, for each party involved in making the agreement.
In other words, is the agreement to their client’s advantage or disadvantage?
By providing this advice and issuing certificates as evidence of the discussion, lawyers ensure that the agreement is enforceable and drafted in accordance with the Family Law Act.
Is There an Alternative to Making a Binding Financial Agreement?
Certainly, unless you have already entered into a previous BFA, you retain the right to have your matter heard by the Family Court, where the court will make the decision on how to divide your property. However, resorting to contested litigation in court is typically considered a last option due to the considerable expenses involved.
What Is a Consent Order for Separation?
If both parties have come to an agreement about how to divide their property and finances, and they wish to make the arrangement legally binding, they can also apply to the court for orders by consent. In the proposed arrangement, you present your agreement to the magistrate, and if the magistrate agrees that your arrangement is fair and equitable, he or she will issue a court order. Both parties are then required to comply with the order.
However, if the magistrate perceives your arrangement to be inequitable (unfair) then you will have the option to reapply. (go back to the drawing board).
Generally speaking, it is advisable to have an experienced lawyer draft your application for Consent Orders because they can ensure that it is properly prepared and contains all the information the court will need to approve your application. However, it is important to note that this is not a legal requirement. You have the option to draft the application yourself if you choose to do so.