What Are The Pros and Cons of Financial Agreements?
Justice Family Lawyers Sydney
Advantages of entering into a Binding Financial Agreement
There are many benefits for entering into a BFA. Firstly, a BFA can be a type of ‘relationship insurance’.
It would serve as a safety net, regardless of whether it ends up being used or not. Secondly, it can empower a couple to decide in advance what they would quantify as a fair distribution of financial assets, resources and liabilities. It can also mean that laying out provisions whilst the relationship is happy together, if entering into a BFA prior to separation, means the agreement is likely to reflect what both parties would accept is reasonable.
A BFA can also enable the more financially wealthy partner that the other party is not in the relationship for materialistic reasons. Additionally, ground rules are able to be established regarding who will pay for what bills, how property is divided and where income will go. If either party has already been a separation or divorce, a BFA can also provide reassurance.
Finally, a BFA can be a more cost-effective and simple solution than other options post-separation. This could include the higher costs of trying to negotiate a settlement or having the Court decide the division of assets and financial resources.
Disadvantages of entering into a binding financial agreement
There can be some risks to entering into a BFA. This can include that it is sometimes difficult to bring up the topic of entering into such an Agreement with your partner. Your partner may fail to see any benefit for themselves. Secondly, BFA’s do not allow for Third Parties to enter the Agreement. The actual agreement may also end up being unfair for one party, if not all possible scenarios are accounted for. It is notable that the Court will not set aside a BFA simply because it is unfair to one party.
The legal fees in drafting the Agreement and the requirement for both parties to retain separate Independent Legal Advice can also be costly. There is also no scrutinizing body to consider the terms of BFA, nor is there a registration system to note when a BFA has been entered into. Finally, the law surrounding a BFA can be complicated and there are not many cases as to when a BFA has been set aside. This can cause a degree of uncertainty.