Is Your Binding Financial Agreement up-to-date for your current needs?

Written by: Jitesh Billimoria

Whilst the term Love Insurance isn’t a formal product offered by insurance companies, it is a creative metaphor for safeguarding relationships, especially where love and romantic partnerships face increasing everyday challenges, now more than ever.

Under Family Law terminology, the safeguarding of a relationship is found in the way of a Binding Financial Agreement. This document sets out a contract that allows two parties to state how they want to manage their own or joint assets, liabilities, and finances in the event of a relationship breakdown.

Entering a new significant romantic relationship without any form of protection or planning can indeed be risky. Whilst hope and optimism are important for any relationship, having practical measures in place can provide a sense of security and preparedness.

Therefore, it is important to consider whether entering into a Binding Financial Agreement may help create a better understanding for each party as the relationship develops and becomes more serious.

What is the importance of a Binding Financial Agreement?

The concept of ‘love insurance’ poses an important question: just as we take out insurance to protect material possessions, should consideration be given to protecting our assets and finances, when entering into or during a relationship?

For many, the answer could be ‘yes’ – especially in the context of an individuals’ second or third relationship. In such circumstances, entering into a Binding Financial Agreement may be a greater requirement to achieve peace of mind for each party given complexities such as children from a previous relationship or financial arrangements.

Whilst it might seem unromantic to discuss such matters before or during with a partner or spouse, a Binding Financial Agreement is designed to allow focus on building for the future, rather than worrying about potential legal outcomes in the event of the relationship ending.

Other such reasons why taking proactive steps might be beneficial may include:

• Clear Expectations: Setting up agreements or plans can help clarify expectation and responsibilities from the outset, reducing the potential for misunderstanding and conflicts later on.
• Financial Security: Understanding how finances will be managed and protected can help prevent disputes and ensure that both partners are on the same page regarding financial matters.
• Legal Protection: Having legal agreements or documents, can provide protection for both partners and any future children. It ensures that your wishes are respected and can help avoid legal battles in the event of unforeseen circumstances.
• Emotional Reassurance: Knowing that you have taken steps to protect your interests can provide emotional reassurance, allowing you to focus more on nurturing the relationship rather than worrying about potential pitfalls.

Whilst it is natural to hope for the best, balancing that hope with practical measures can create a stronger foundation for the relationship. It shows a commitment to both partners’ well-being and can help build a more resilient relationship.

Maintaining Your Binding Financial Agreement

For relationships that utilise a Binding Financial Agreement, there may be a need to update and amend the documentation to better reflect any changing circumstances of the relationship and ensure it still provides coverage across the areas of which it was established.

It is important to periodically review and update a Financial Agreement (or prenuptial agreement) to ensure it remains relevant and effective as circumstances change.

You can review and update your Financial Agreement as follows:

• Schedule Regular Reviews with a Legal Professional: Set a regular schedule, such as every few years or after major life events with a Family Lawyer or legal adviser who specialises in Financial Agreements to assess whether updates are needed and to ensure compliance with current laws.
• Communicate with your Partner: Have open discussions with your partner about any changes in your circumstances or concerns that might necessitate updates to the agreement.
• Document Changes: If updates are needed, ensure that they are properly documented and legally formulised to avoid any future disputes.
• Consider Financial and Emotional Well-being: Make sure the agreement reflects both partners’ current financial situations and emotional well-being, providing fair and equitable provisions.

If you have a Binding Financial Agreement in place entered into prior to the COVID-19 period, you may want it amended/updated to better reflect todays’ current economic environment and property market.

For example, what if you entered into an Agreement in a prior year (i.e. say 2014), and have received an inheritance since, which has been applied to a property purchase. You may have since borrowed further using that purchased property, and then purchased another property in joint names.

In that situation, do you know what your Agreement says about how to treat that inheritance and how any real property or properties that were purchased subsequently?

Consideration should also be given to how funds may have been amalgamated in the purchase – whether it is a share portfolio, additional contributions to superannuation or a self-managed superannuation fund, and/or the purchase of real property(s).

An updated Agreement provides:

• Alignment with current circumstances: Ensure the Agreement reflects your current financial situation and personal circumstances.
• Prevention of Disputes: Reduces the likelihood of conflicts by keeping the agreement relevant and fair.
• Continued Protection: Maintains effective protection for both parties and any dependents or assets involved.
• Peace of Mind: Provides reassurance that your financial and personal interests are safeguarded in light of any changes.

By proactively managing your Financial Agreement and keeping it up-to-date, one can prevent many potential issues and ensure that the Agreement continues to serve its intended purpose effectively.

Regular reviews and updates are key to maintaining clarity and protection in one’s financial and personal arrangements.

For more information

Having now read a little about a Binding Financial Agreement and ensuring to renew and review such documentation, if we can be of assistance in such matters or regarding your current circumstances, please contact our office on (07) 3859 4500 or via contact at www.jhklegal.com.au to arrange a confidential discussion as to how we can help you.