The topic of Binding Financial Agreements makes people squirm. It feels formal and unromantic. It is almost like a jinx to love or stigma on a new relationship.I recently appeared at a telephone hearing for a sole application for a divorce. In some cases, Court hearings can be conducted over the telephone. The divorce process is frequently conducted over the telephone which is excellent in many ways for our clients, especially ones with anxiety or ones that cannot make it into the office because they live remotely.
Some of us think with our heads and others with our hearts. If you are really lucky you will be able to think with both. In love, I find myself torn between my head and my heart.
BUT…. protecting your assets and your family are number one on the list of priorities for many people. Often, they do not know how to do this or where to start. The best way to protect your assets is to talk to a lawyer about a Binding Financial Agreement (BFA). Another BUT… BFA’s are expensive, tricky and at times a risky document. Despite the red flags, BFA’s are an essential investment into protection of your assets, family and future.
A BFA, what is it?
A BFA is a private contract between a couple, including same-sex partners that outlines how their property, assets, superannuation and liabilities will be divided if they separate. They can be drafted at any stage including the end of a relationship. There are a few types of BFAs, entered before co-habitation (prenuptial agreement), during a relationship (cohabitation agreement), or when a relationship ends (postnuptial agreement).
In Thorne v Kennedy [2017] HCA 49, the High Court of Australia provided valuable insights into the enforceability of BFAs in the context of marriage and the protection they offer to parties, particularly in blended families. This case shows the importance of fairness, equity, and the absence of undue influence when entering into BFAs. The relevant sections of the Family Law Act do not speak to fairness but this case certainly does. Families need to keep this in mind during discussions a BFA with their lawyer.
Ms Thorne, an Eastern European woman, moved to Australia to marry Mr Kennedy, an older Australian/Greek property developer. Mr Kennedy insisted on a prenuptial agreement, to protect his considerable assets, amassed prior to the marriage. Ms Thorne, who had minimal assets and limited English, agreed to the BFA, despite receiving legal advice against it. Eight years into the marriage, significant disputes arose, she sought to set aside the BFA.
The High Court found:
The Thorne v Kennedy case highlights critical considerations for entering into BFAs within blended families:
Consider a blended family where both parties, Alex and Jamie, each have two children from their previous marriages. They decide to enter into a BFA to protect their respective assets and secure their children’s financial futures.
To avoid issues similar to Thorne v Kennedy:
By entering into a well-structured BFA that adheres to the principles highlighted in Thorne v Kennedy, Alex and Jamie can achieve:
The Thorne v Kennedy case provides a valuable benchmark for drafting Binding Financial Agreements, particularly within blended families. By ensuring the absence of undue influence, providing fair and independent legal advice, and maintaining equitable terms, BFAs can be a safeguard protection. For blended families like Alex and Jamie’s, this approach provides financial security and fosters harmony. It also encourages wealth creation because shared joint ventures can be divided fairly in the event that separation becomes necessary.
At Adelaide Legal Solutions, we are committed to providing comprehensive legal advice tailored to your family situation. No family is the same, we all have unique complexities. If you are considering a Binding Financial Agreement, our team and Elena are here to help.
Contact us today to schedule a consultation and explore how we can assist you.
Let us guide you through this important process, ensuring peace of mind and security for your family.
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