NSW De Facto Relationship Binding Financial Agreement Timing

[Dave Pearsen]

I am in a de facto relationship. Right now, neither of us make enough money to justify the expense of drafting and signing a Binding Financial Agreement (BFA) with lawyers.

It seems that it would be more reasonable to wait until we have started earning a decent amount of money before going through the time and expense of getting a BFA. Is it reasonable or foolish to wait like this?

I am a saver and investor. She is a spender. She also earns a lot more than I do. We both agree that we don't want "money to be a factor in our relationship". We always combine equally on all joint purchases, and then we do what we like with the money that we earn. We will not have children.

Am I *risking anything by not getting a BFA now, but waiting to get one later when we both have more wealth?

 

[Sarah J]

Hi Dave,

I'm glad you and your partner are thinking ahead.

You and your partner do not need a lawyer to draft up a binding financial agreement. You two can draft one yourselves. Just make sure it is in writing and signed and dated. If you do get separated, the court will consider this written agreement in its deliberations (along with other factors such as each person's contribution to the partnership, expenses of each partner, relative earning power).

 

[Dave Pearsen]

Thanks Sarah!

That's great advice. We hadn't considered that we could just draft an agreement ourselves, sign it, and even though it wouldn't count as a proper BFA, that it would still stand as a good written statement of our financial intentions and principles.

I would appreciate if you could still give your advice on my initial question: whether or not it would be unwise to wait some years until we are both financial better off before paying the fees for lawyers to properly draft and witness a BFA?

In other words: would the BFA be weakened or lose any legal standing by the fact that it was only properly drafted and signed years into a defacto / marriage relationship?

 

[rebeccag]

Hi Dave,
The most legally correct course of action would be to get a lawyer to review it after you've drafted it and provide a certificate that you have received independent legal advice. You both need to separately receive independent legal advice in order for the Binding Financial Agreement to be legally binding. Its not legally binding under the Family Law Act until you get that independent legal advice. So the longer you wait and if the relationship breaks down without a BFA in place, you risk losing out more than you otherwise would have if you decided how your assets will be split now while things are amicable.

SarahJ was hopefully about to mention that you don't want to get to the point of 'the court' considering what you did or didn't mean. Because if you go to court because you didn't have this organised, you can be looking at thousands to tens of thousands of court fees and lawyer costs at that point.

You might also find this LawAnswers blog post helpful In a De Facto Relationship? Here's What You Need to Know! - LawAnswers.com.au Blog and the BFA information here Binding Financial Agreement (De Facto Living Together) - Australia except WA + Bonus Will Kit | LawAnswers.com.au Legal Aid Forums

Oh, and if you intend to get married, you'd create a Binding Financial Agreement that's commonly called a prenuptial agreement, very similar to what you'd have as a de facto.

 

[Dave Pearsen]

Rebecca,

Thanks. If we were both wealthy we would certainly pay the thousands of dollars now for a BFA to be properly drafted and signed. My question was: would it be unwise in any way to wait some years into our marriage before paying the fees for lawyers to properly draft and witness a BFA?

In other words: Is a BFA stronger the earlier it is drafted and signed? Or is one that is signed ten years into a marriage just as strong as one that is signed at the start of the marriage?

Thanks!

 

[rebeccag]

Thanks.
The concept of when something is 'stronger' doesn't really apply in the situation you've outlined, except for its not recommended that you sign a BFA in the couple of weeks leading up to your wedding as that could potentially open a loophole for signing under duress.

Drafting your BFA now yourself won't cost you anything, but you can get independent legal advice that would cost under a thousand dollars assuming you did the work yourself setting your intentions and assets and debts split in the BFA.

So yes, you can create the BFA when you have money and as long as you both get independent legal advice, it'll be binding. Binding is binding, 'stronger' won't come into it. So its up to you whether you're comfortable that the relationship will not break down in the meantime where you don't have a BFA protecting you in place.

 

[Sarah J]

Hi Dave,

I agree with what Rebecca has helpfully written above.

1. A binding financial agreement, under the Family Law Act, must comply with formalities (i.e. in writing, signed, dated) and both parties must get independent financial advice beforehand, for it to be valid.
2. It does not matter when, during your relationship, you make the BFA.
3. Although it would not qualify as a BFA, you and your partner can still make a written agreement as to how to split property now. The benefit of this is: (i) you and your partner can record what you agree on, so when you do draft the BFA, it will be easier; (ii) it's always a good idea to record what you agree on in writing so that later on, you can refer to the agreement instead of incurring a "he said she said" dispute; and (iii) if you do not ultimately have a BFA, a written agreement (signed by both parties) can still be referred to in negotiations and property disputes down the track.