It Depends – What are some alternative uses for a binding financial agreement?

In this edition of ‘It depends’, special counsel Steven Jell talks about financial agreements and their alternative uses.

Steven, along with Craig Turvey, will be covering this topic in more detail during their session ‘The many uses of financial agreements’, at our Annual Adviser Conference on 21 and 22 March. Register now to attend live at Sofitel Brisbane or virtually.

Video transcript

Hi, and welcome to another edition of It depends. Today, we’re going to be talking about binding financial agreements and their alternative uses. Craig Turvey and I will be discussing this at our Annual Adviser Conference on 21 and 22 March.

What is a binding financial agreement (BFA)?

So, a binding financial agreement is an agreement prepared under Australian Family Law legislation, under which a couple agree to divide their assets when their relationship ends. So, while binding financial agreements are used quite frequently for this core purpose, there are a number of other reasons why people prepare binding financial agreements.

Can my BFA be used for other purposes?

So, as the story goes, the answer to this question is: it depends. So, depending on an individual’s circumstances and the outcomes that they’re looking to achieve, there may be other purposes for which their binding financial agreement can be used.

What other ways can my BFA be used?

So, there are many other uses for binding financial agreements, but the effectiveness of those other purposes really depends on the outcomes that clients are looking to achieve. One of the main ways in which a binding financial agreement could be used for alternative purposes is for the parties to agree to contract out of challenging each other’s estates following the death of one of them. So, for example, when we’ve got an older couple, they’ve got children from previous relationships and they’ve entered into a new relationship, a binding financial agreement could include terms under which they each agree not to challenge the Will of the other. Now, these types of terms are generally not effective under the relevant state legislation. However, when it comes to a court considering a family provision application, the courts will generally consider the terms included in any binding financial agreement when determining whether or not to award a provision for one of the parties. Another way in which our clients use binding financial agreements is where they’ve got concerns about the longevity of their children’s relationships. It is possible for those clients to include terms under their Will in which a child would need to sign a binding financial agreement with their current or future spouse before receiving an inheritance. Now, these terms can be quite onerous in most family situations. So, we generally don’t recommend clients include terms like this without first discussing them with their children.

Now, if you’re interested in exploring this topic a little bit more, please feel free to register for our Annual Adviser Conference this 21 and 22 March. Thanks for watching this edition of It Depends.