NORTHERN TAX & FINANCIAL SERVICES
Whilst it’s a topic that may seem somewhat taboo at times, the idea of a Binding Financial Agreement (or BFA), is one that many should consider when entering into a new relationship, particularly if you have a considerable wealth base, and feel that it should be protected.
A BFA is an agreement between soon to be married or already married couples and de facto couples, which could be made either before, during or after their relationship.
This agreement illustrates how your financial investments, assets AND liabilities will be divided if your relationship fails.
So why would you consider such an agreement?
By preparing a BFA, both parties lose (contract out of) the right they would have otherwise had to ask the Family Courts to determine the asset split post separation.
The BFA allows the couple to agree in advance how the assets will be split at settlement if they separate.
Is it too late if you are already in a relationship? Our answer is no, but you need to obtain expert legal advice, and don’t feel bad about it either.
We often hear the comment, ‘But if you love me, you wouldn’t be asking me to do this’.
At the end of the day, if a couple is together for the right reasons, then the asset split should make no difference to that person, either way. A BFA allows the individuals to make their own rules about how the split would occur, and is particularly useful for those who need reassurance (i.e. if you have already been through a divorce already).
It can help take the stress away, and let you concentrate on nurturing a happy relationship, without the worry of what will happen if and when.
It also can save a lot of money down the track in legal fees and court costs. The BFA can also illustrate how things will happen when property is acquired during the relationship, how expenses are paid and how income is treated.
A BFA is particularly useful for those who already have children and assets who then enter into a new relationship.
We find a BFA is particularly useful as an Estate Planning Tool prepared by your lawyer to ensure property passes as the owner would intend, and it may, depending on the circumstances, provide Capital Gains Tax and Stamp Duty Relief for couples who separate provided they meet certain criteria.
The most challenging part will be broaching the subject with your spouse and they may be apprehensive. But with a good lawyer and accountant on your side, you can be assisted through this process in the simplest of ways.
Because the BFA must be so detailed, it can be quite complicated when many situations need to be disclosed. The downside is if a matter occurs that has not been considered in the BFA, this can lead to a biased outcome to either party. The lawyer would also have to explain what circumstances that could arise which would lead to the agreement being set aside, and these laws are complex as to how the Courts will treat the BFA in certain situations.
My suggestion to my clients, because I want to help them protect their wealth and future, is to always consider a BFA, and whether or not such an agreement will be beneficial in their situation. It is always worth considering now, rather than wait until it’s too late, and look back and say, “We should have done that”.
The information provided is general advice only. We have not considered your financial circumstances, needs or objectives and you should seek the assistance of a qualified advisor before you make any decision regarding any products mentioned. Whilst all care has been taken in the preparation of this material, no warranty is given in respect of the information provided and accordingly Northern Tax & Financial Services Pty Ltd employees or agents shall not be liable on any ground whatsoever with respect to decisions or actions taken as a result of you acting upon such information.