Binding Financial Agreements or “Prenuptial Agreements”

We at AH2 Legal often get asked by couples intending to marry soon or wanting to commence a de-facto relationship – “How can we protect our assets if our relationship or marriage fails?” Many people, after watching various television shows about divorce, think that prenuptial agreements or “pre-nups” are the perfect answer to this problem. In Australia, the proper term for such agreements are – Financial Agreements or Binding Financial Agreements (BFA).

In some countries, parties in a marriage are able to enter into agreements that stipulate that if a divorce occurs on account of the adulterous actions of the adulterer, then the adulterer must pay significant amounts of money for damages to the other party. However, there is no such mechanism here in Australia when dealing with such a situation in light of Australia’s “no-fault” divorce system.

People may think that BFA’s can fully protect their assets if the relationship or marriage fails, but this is not always the case. Parties must be very careful as BFA’s are not always legally binding due to a number of reasons such as the BFA not being entered into by the parties on their own free will, or it being signed without the BFA being properly explained to them, or the BFA being improperly drafted by lawyers. 

In a recent case, Thorne v Kennedy [2017] HCA 49, the High Court of Australia set aside a BFA presented by a wealthy partner shortly before the wedding and with the other partner being told that the wedding would not go ahead unless the BFA was signed. The BFA was set aside although the agreement was properly drafted and both parties had obtained independent legal advice before signing the BFA. 

As such, a proper BFA must be drafted by competent Family Lawyers who know what they are doing and explained in detail to the parties in order to provide the best possible degree of protection of your assets in the event of a separation or divorce.  


What is A Binding Financial Agreement?

In Australia, a BFA is an agreement that is compliant with the Family Law Act 1975 (Cth) that covers the division of property between the parties. In Australia, a BFA can be entered into by the parties before the relationship/marriage, during the relationship/marriage, and even after separation or divorce.

The purpose of a BFA is to avoid the parties going to court to deal with the division of their property as the BFA will outline how the parties are to manage their financial affairs in the event the marriage or relationship fails.

We understand that couples planning to marry or committing themselves to a de-facto relationship are making a significant emotional investment in what they are hoping to be a happy long term relationship and are not thinking about the relationship ending in separation or divorce. However, it is important to take steps to minimise the trouble and grief of having to deal with separation and the issue of property division should the marriage or relationship regretfully ends.


In Australia, BFA’s are commonly entered into by parties who have been married before and are thinking of marrying again. However, even if this is your first marriage or de-facto relationship, there may be good reasons as to why you would want to enter into a BFA such as:

  • You may have inherited or will inherit in the future – assets and are concerned about what may happen to that inheritance at a future date if you were to separate; or
  • You may have properties purchased by your parents in your name; or
  • You or your partner may have assets which you are bringing into the relationship and one or both of you may want that recognised; or
  • You may have built up assets before the dating aspect of your relationship commenced; or
  • You may feel that you have a stronger financial obligation to people other than your new partner if you were to break up within a period of time.

What makes a Binding Financial Agreement binding?

In Australia, for a BFA to be binding it must:

  • Be prepared in accordance to the Family Law Act1975 (Cth);
  • Be entered into by the parties without coercion (on their own free will);
  • Be in writing;
  • Be signed by both you and your partner;
  • Contain a statement to the effect that before the agreement was signed by the parties, that each party has received independent legal advice from their respective independent lawyer as to the following matters:
  • The effect of the agreement on the rights of that party; and
  • The advantages and disadvantages, at the time that the advice was provided, to the party of making the agreement; and
  • Include a certificate signed by the lawyer providing the independent legal advice stating that the advice was provided.

We often get clients who tell us that they have already prepared their own agreements prepared in their home countries and have had such agreements notarized. Clients may think that these agreements are official and therefore binding on the parties in Australia. Unfortunately, such privately made agreements in their home countries are not valid in Australia and will not be accepted by the Family Court should the relationship or marriage fail, and property division claims are made in the Court.

What matters can a Binding Financial Agreement cover?

A BFA can cover the following areas:

  • Financial settlement (property settlement) – all or selected property of the parties. It may include property acquired before or during the relationship.
  • Financial resources – parties may agree on the issue of any inheritance that a party may receive before or during the relationship.
  • Rules about buying and owning property – parties may agree about whose name the property will be registered in, who will be paying for the mortgage and the maintenance of the property etc.
  • Superannuation – parties may agree on the division of their respective superannuation interests in case of separation.
  • Financial support in the form of spousal maintenance.

However, a BFA does NOT cover the following areas:

  • Child support;
  • Non-matrimonial issue such as house duties;
  • What would happen if the parties pass away as a BFA is not a replacement for a valid Will.

When used properly, a well drafted BFA can be a good way of minimising the anxiety of what will happen to you and your family should the relationship not last as it will set out clearly what each of you intends to happen upon separation. To have the best possible chance of protecting your assets, the BFA should be prepared by a competent Family Lawyer that knows what he or she is doing.

If you are interested in finding out more about BFA’s and how you can better protect your assets, please do not hesitate to contact one of our friendly lawyers at AH2 Legal to discuss your matter in further detail.