Binding Financial Agreements
Binding Financial Agreements is a legal agreement made between parties before, during or once a relationship has ended. It is this legal agreement which determines the financial arrangement which is to take place either during the term of the relationship or after the relationship comes to an end.
If you have signed a Binding Financial Agreement you agree to how your financial resources, assets, liabilities are to be divided. Therefore if there is a dispute between the parties as to financial arrangements in a Family Court after separation and you have signed a BFA, then you will lose your right to dispute the division of your financial items. This is because the financial resources will be divided according to what has been agreed in the Binding Financial Agreements.
Why do people enter into Binding Financial Agreements?
- In case of separation, parties have the reassurance that they will receive equitable treatment financially, especially in the cases where large asset are brought into the relationship by one party and not the other.
- Peace of mind especially one party has children or assets that they wish to protect in the case of a relationship breakdown.
- Estate planning – ensuring that property passes through as intended
- People who wish to protect themselves against a possible claim against their assets in the event of separation or sometime in the near future
When does a financial agreement become binding?
When the parties to a financial agreement obtain formal legal advice and are issued with a Certificate pursuant to the Family Law Act, then the financial agreement becomes binding on the parties to the agreement.
Can you terminate a Binding Financial Agreement?
Yes, but this can only be done in accordance with the Family Law Act which states that parties may terminate the agreement only if:
- Parties include a provision relating to termination in another financial agreement
- Parties draft a written agreement, “termination agreement”
The Act states a number of factors determining when the termination agreement becomes binding.
Effect of Binding Financial Agreement’s upon the death of either party
A binding financial agreement continues to operate despite the death of a party to the agreement and operates in favour of, and is binding, on the legal representative of that party.
The legal representative of a deceased party can then either enforce the BFA or apply to set aside the BFA after the death of a party.