A binding financial agreement is also known as a prenuptial agreement or a prenup.
It is a written, legal agreement between the people in a marriage or a de facto relationship that sets out what the financial arrangements would be should the relationship end.
The term ‘prenup’ comes from the fact that you and your spouse can make a binding financial agreement before getting married, or before entering into a de facto relationship.
However, binding financial agreements can also be made at any time during or after the marriage or de facto relationship, including after separation and divorce.
Binding financial agreements make agreements between spouses official. If you come to a consensus about how you would like your property to be divided, drawing up a binding financial agreement formalises this.
Therefore, you and your spouse avoid the time, expense and stress involved with going to court to have your assets divided.
Binding financial agreements can cover property settlements, including the division of superannuation entitlements, and spousal maintenance of one person by the other, as well as any incidental issues.
There are quite strict legal requirements set out in the Family Law Act 1975 that define how a binding financial agreement must be written and signed and in what circumstances it may no longer be valid.
For the agreement to be legally binding, both parties must have signed the agreement and must have obtained independent legal and financial advice before signing.
Each party must also receive a signed statement from the legal practitioners.
A binding financial agreement can be terminated by the parties involved by drawing up and signing a new agreement.
The court can also set a binding financial agreement aside for many reasons including fraud, a significant change in the parties’ circumstances and impracticality.