Are you considering a binding financial agreement but unsure of whether it is right for you?
Spoiler alert. A binding financial agreement is typically a good safety measure for most de facto relationships and marriages. However, if you are not convinced, this article aims to discuss Binding financial agreement advantages and disadvantages to help make your decision a little easier.
What Is A Binding Financial Agreement?
Before we discuss binding financial agreement advantages and disadvantages, we should introduce what exactly binding financial agreements are. A binding financial agreement is a legally binding document under the Family Law Act that outlines how a couple’s assets will be distributed upon the breakdown of their relationship.
The Family Law Act has specified that the document may be entered into by both parties to a marriage and de facto relationship. Accordingly, it has provisions that cover each form of relationship.
Advantage – Can be Entered Into At Any Time
Another binding financial agreement advantage is that it can be entered into at any stage of the relationship. Far too often, people believe that the agreement can only be entered into before marriage because of the American counterpart that is the pre-nuptial agreement or prenup.
This is not true. A binding financial agreement may be entered into before, during and even after the marriage.
Advantage Of Certainty
The most prominent binding financial advantage is the certainty over how property and assets will be divided if the relationship was to dissolve. Far too often, couples naively will believe that if their marriage or partnership was to dissolve, they could amicably divide their mutual property and assets fairly. While this is true for some, typically, what happens is that emotions are high, and the stress of the ordeal is far too overwhelming for some individuals to reach logical and fair compromises.
The arrangement will also ensure that your partner understands the nature of the relationship following a divorce and what assets they will retain.
Advantage Of Costs
Legal fees, which encompass court, application and lawyer fees, can be incredibly costly. If the matter was to proceed to the courtroom setting, the costs could easily range in the tens of thousands of dollars and even into the six-figure range depending on each party’s willingness to compromise. Accordingly, a significant binding financial agreement advantage is the ability of the instrument to reduce the financial strain associated with family law proceedings.
Advantage Of Efficiency
A binding financial advantage that most people do not consider is the sheer efficiency it presents in contrast to dividing property and assets in the courtroom setting. In Australia, the court system is inundated with matters, so getting a hearing date can sometimes take many months. This issue is also compounded when former partners cannot reach agreements, and court proceedings are dragged out even further. Having a binding financial agreement in place means avoiding all of this unnecessary litigation and emotional turmoil.
Advantage Of Protection
A significant advantage is the security and peace of mind of knowing that your property, assets and financial future are protected if the relationship was to dissolve. The document gives you the flexibility to specify what property and assets are essential to you and what you wish to retain. The agreement can also be made to ensure that your assets will go to your children in instances where you have been married multiple times.
Disadvantage Of Security
In some instances, a binding financial agreement is used to protect one party’s interests significantly more or exclusively in contrast to the other party to the relationship. This situation commonly occurs when one party enters the relationship with a more extensive portfolio of property, assets, and money. Unfortunately, because of this, the other party feels compelled to agree to a binding financial agreement which will leave them unprotected or risk losing their partner.
Disadvantage – May Negatively Impact Your Relationship
Quite possibly, the most significant binding financial agreement disadvantage is the fact that in some situations, the mere mention of the instrument is enough to cause tremendous strain on a relationship before marriage has even begun. Some individuals will view the agreement proposal as a lack of faith in the relationship rather than a security measure.
So… Should I Consider A Binding Financial Agreement?
When it comes to binding financial agreement advantages and disadvantages, it is clear that far more advantages weigh in favour of the document. The only significant risk the agreement may have is the strain which it may cause on your relationship, which may be counteracted by thoroughly preparing for the conversation with your partner with reasonable viewpoints regarding the matter.
Importance of Seeking Legal Advice
It is important to note when considering binding financial agreement advantages and disadvantages to
Here at JB Solicitors, we’ll make the process as pain-free as possible. We have fixed-fee pricing for family law, giving you a clear sense of the costs from the start, and we will be sure to help you out every step of the way. With years of experience under our belt, we pride ourselves on making each client’s family law experience as positive as possible.
Contact JB Solicitors today to speak with one of our friendly and experienced family lawyers.
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