You’ve been together five years, bought a house, and your status feels permanent. But if your de facto relationship ends tomorrow, would you know what you are legally entitled to? It’s a question worth asking now while things are good – and it’s exactly why you might want guidance on whether de facto couples need a binding financial agreement in the first place.
The Family Law Act 1975 (Cth) gives eligible de facto partners similar property and maintenance rights as married couples. However, proving de facto status can add complexity to a breakup, leading to protracted negotiations or even court proceedings if you cannot agree.
A financial agreement (known as a binding financial agreement or BFA) predetermines how your finances, property, and other assets will be handled if the relationship ends. This can provide protection and give both parties certainty as to where they stand.
Can De Facto Couples Enter a Binding Financial Agreement?
Yes. De facto couples in NSW have the same legal right to enter a BFA as married couples, provided they meet the Family Law Act’s requirements for a de facto relationship and for a valid BFA.
De facto relationships are recognised under the Family Law Act when two adults live together on a genuine domestic basis. Factors considered when determining if a de facto relationship exists include:
- the duration of the relationship
- the nature and extent of the couple’s common residence
- whether there is a child of the relationship
- whether the couple has a sexual/intimate relationship
- whether they share joint bank accounts or property, and daily living costs
- whether their family and friends know them as a couple
- the degree of mutual commitment to a shared life
- whether the relationship was registered under a state/territory scheme
When Should De Facto Couples Consider a Financial Agreement?
Married couples and de facto couples are treated similarly in many areas of the law, but the practical difference can be proving the relationship. While a marriage certificate settles the question instantly in a family law property settlement, a de facto partner may need to demonstrate the relationship existed – through joint bank accounts, shared leases, or other evidence. A valid BFA can fill the gap by creating clarity where the law might otherwise leave you exposed.
A Financial Agreement can be entered into before a de facto relationship commences, such as by moving in together (in the same way as a “pre-nup” is entered into before marriage) or during a de facto relationship (also known as a “co-habitation agreement”). There are various situations where a binding financial agreement becomes particularly important for de facto couples.
- Before combining finances or making major financial decisions. If you are about to open a joint account, take on a shared mortgage, or pool your savings, a BFA helps establish what belongs to whom from the outset.
- Unequal financial contributions. When one party contributes significant assets to the relationship, a BFA can be used to protect those pre-existing assets in the event of a breakup.
- When acquiring significant assets. Purchasing property, investing in shares, or building a business together are all situations where financial clarity is essential. A BFA can define how these assets would be treated if the relationship ends.
- At the start of a long-term committed relationship. Many couples find it easier to have this conversation early, before emotions are complicated by years of shared finances.
- When entering a blended family situation. If either of you has children from a previous relationship, a BFA can help protect pre-existing assets for your children and clarify how assets will be managed across both families.
What Does a Binding Financial Agreement Typically Cover?
A well-drafted BFA can address a range of financial matters.
- Property division. The agreement can specify how real estate, personal property, and other assets will be divided if the relationship ends. This removes the need to negotiate under pressure at a difficult time.
- Superannuation. A BFA can clarify ownership and set out how superannuation entitlements will be handled – particularly important if one partner has a much larger balance than the other. Superannuation is treated as property under the Family Law Act and can be dealt with in a BFA, including by way of a superannuation splitting provision that complies with the superannuation regulations and is capable of being implemented by the fund trustee.
- Spousal maintenance. The agreement can address whether one partner will be entitled to ongoing financial support after separation, and under what circumstances.
- Asset protection. A BFA can define what is considered separate property, such as assets brought into the relationship or inheritances received, versus what is jointly owned. This is especially useful for protecting pre-existing wealth.
- Debts and liabilities. The agreement can clarify who is responsible for mortgages, personal loans, credit card debts, and other financial obligations, so neither party is left carrying the other’s debt.
- Changes in circumstances. The agreement can adjust for future changes, such as if children of the relationship are born or adopted down the track.
What Are the Legal Requirements for a Valid De Facto Binding Financial Agreement?
Like many agreements, a BFA can be challenged or set aside in limited circumstances, for example, for fraud, material non-disclosure, duress, or where enforcement would be impracticable or unjust. BFAs must also meet strict requirements under the Family Law Act to be enforceable.
- Both parties must receive independent legal advice. This is non-negotiable. You and your partner must each consult separate lawyers before signing. Your lawyer will explain the effect of the agreement and how it impacts your rights.
- The agreement must be in writing and signed by both parties. Verbal agreements or informal arrangements are not legally binding and enforceable.
- Each lawyer must provide a signed certificate. Your lawyer and your partner’s lawyer must each sign a statement confirming that they provided the required independent legal advice. This certificate forms part of the agreement.
- Full financial disclosure is required. Both parties must honestly and completely reveal their financial circumstances, including assets, liabilities, income, and superannuation. Concealing financial information can make the agreement unenforceable.
- The agreement must be entered into voluntarily. Any sign of pressure, coercion, or duress may render the agreement invalid. Both parties should feel free to negotiate and, if necessary, walk away.
How Much Does a De Facto Binding Financial Agreement Cost?
Costs vary depending on the complexity of your financial situation and how straightforward negotiations are. Simple arrangements where both parties agree and have uncomplicated finances will cost less than those involving negotiations, complex property portfolios, business interests, or superannuation splitting.
Family law disputes can be lengthy, draining, and expensive. A BFA negotiated early is always less costly than resolving financial disagreements through litigation.
Key Takeaways
- The Family Law Act gives de facto couples in NSW similar property and maintenance rights as married couples including the right to enter a BFA.
- A valid de facto BFA requires independent legal advice for both parties, full financial disclosure, and proper execution.
- A BFA can be challenged or set aside in limited circumstances, for example, for fraud, material non-disclosure, duress, or where enforcement would be impracticable or unjust.
- A de facto BFA can cover property division, superannuation, maintenance, asset protection, and debts, providing clarity on what happens if the relationship ends.
A binding financial agreement is about making sure that both of you are protected, no matter what the future holds. If you are in a de facto relationship and want to understand your options, speaking with an experienced family lawyer is a good place to start.
Frequently Asked Questions
Can we write our own binding financial agreement without a lawyer?
Does a de facto BFA expire?
What happens if we do not have a BFA and our relationship ends?
Is a de facto BFA the same as a prenuptial agreement?
Disclaimer:
This article provides general information and does not constitute legal advice. Every situation is different, and the information provided may not apply to your specific circumstances. De facto couples ordinarily resident in WA fall under a separate state-based regime rather than Part VIIIAB of the federal Family Law Act 1975 (Cth). You should seek independent legal advice from a qualified Australian lawyer before making any decisions about your legal arrangements.