Why You Should Consider a Binding Financial Agreement for Estate Planning

Ever thought about how your assets would be handled if your relationship ended or if you passed away? A Binding Financial Agreement (BFA) might be the missing piece in your estate plan. It’s more than just a document—it’s peace of mind. Let’s unpack some common questions about BFAs and their role in estate planning.

What is a Binding Financial Agreement?
A BFA is a legal contract in Australia that sets out how finances and assets will be divided during or after a relationship, including marriage and de facto partnerships.

Agreements of this sort reached at the beginning or during a relationship usually state that each party will retain the respective assets in the event of a breakup, ie what’s yours is yours and what’s mine is mine. In doing so you now know what assets you have to deal with in your estate planning.

When is a BFA recommended?
It’s ideal for couples entering a relationship, during a relationship, or even after separation. It’s especially helpful for those with significant assets, business interests, or children from previous relationships.

It is recommended that you create certainty in exactly what assets are yours to deal with.

Are all Agreements binding?
Not necessarily. For an agreement to be legally binding, ie a proper Binding Financial Agreement, both parties must receive independent legal advice, and the agreement must meet strict legal requirements. You should therefore consult with a lawyer to take you through the process and ensure that your agreement meets the legislative requirements. An agreement that you and your partner reach privately will not be enforceable.

Further BFAs can be overturned if there was fraud, undue pressure, lack of full disclosure, unconscionable conduct by one party (eg making the other party sign on the eve of a wedding), or a significant change in circumstances that would render the agreement unfair.

So, you must do this properly, informal agreements don’t count.

Why include it in estate planning?
A BFA helps ensure your wishes for asset distribution are clear and protected, reducing the risk of disputes among family members or former partners.

You have to know what you have before you can give it away.

How does a BFA affect your estate?
It can influence how your assets are divided, ensuring your intentions are respected and reducing complications for your executor and beneficiaries.

Also, BFA’s can also include a waiver of any claims against your estate (may be subject to court approval and depend on the state in which you live).

Can a BFA be used as an estate planning tool?
Absolutely. It’s a proactive way to align financial agreements with your estate plan, offering clarity and protection for your assets.

Is the BFA a ‘binding’ agreement on the couple?
Yes, if it meets all legal requirements, it binds the couple to its terms, making it enforceable.

At death, what prevails—the Will or the BFA?
They work together but cover different things. The BFA outlines asset division during the relationship or separation, while the Will handles asset distribution after death. Even if you decide not to claim the assets of your partner in a BFA doesn’t mean that you can’t leave them gifts, or indeed significant property, through your Will if you die.

Does a BFA prevent family provision claims?
No, a BFA doesn’t stop family provision claims entirely, but it can strengthen your estate’s position in such disputes. You should speak with a lawyer to discuss your concerns.

Why does the Family Court ignore BFAs?
Courts may set aside a BFA if it’s unfair, wasn’t made correctly, or if one party was pressured into signing.

A Binding Financial Agreement is more than a financial safeguard—it’s a key piece of your estate planning puzzle. It helps protect your wishes, your assets, and your loved ones from unnecessary stress. Thinking of adding a BFA to your plan? It’s a smart step to take for your peace of mind.

DISCLAIMER

This is a commentary published by HazeLegal for general information purposes only. This is not meant to be taken as particular advice. You should seek your own legal and other advice for any question, or any specific situation or proposal, or get in touch with the writer at http://hazelegal.com.au before making any final decision. The content also is subject to change. A person listed may not be admitted as a lawyer in all States and Territories.