Protect your assets wisely to stay secure in your perfect relationship!
So you’re in the perfect relationship with the perfect partner? You know you belong together and thoughts of anything different are just not relevant. But that is all about now, the present! In business – as you know if your business is doing well – we need to always look to the future as well as the present, and this is relevant also where our personal relationships intersect with the business.
Although it may be the case, there is no certainty that your relationship is a lasting one. You can, however, ensure certainty in protecting your assets through Binding Financial Agreements (BFA’s). These may be in the form of a Financial Agreement, a Relationship Agreement, or a Pre-Nuptial Agreement. I also like to call BFAs ‘Big Financial Assets’, as your BFA may be the most important document you own.
What is a Binding Financial Agreement?
A BFA is an agreement (or contract) between couples that can be put in place by a solicitor either prior to, during or after the following stages of a relationship:
- A De facto arrangement
- Marriage (‘pre-nuptial’ for agreements arranged prior to marriage)
- Separation
- Divorce
BFAs are relationship agreements that set out how a couple will divide their home, assets (potentially including superannuation) and liabilities in the event of a breakup.
There are specific requirements of BFAs for them to be ‘legally binding’. These requirements focus on each party having every opportunity to consider carefully (with professional advice) the details of the agreement: both parties must be fully informed (through independent legal advice) regarding the effect of the agreement on their ‘rights’ and what the pros and cons are of entering into the BFA; both parties must sign the agreement document of their own free-will.
Don’t Let One Awkward Conversation Break The Bank!
You may not want to consider a Binding Financial Agreement, but is that a risk you are willing to take?
Advantages of a Binding Financial Agreement:
- Peace of mind in regard to what would happen to your finances if your relationship broke down.
- Peace of mind for parents/grandparents through the protection of inheritance rights.
- Tax benefits – for example, stamp duty may not be payable for the transfer or sale of a property if transfer of ownership is agreed within a BFA.
- It can be viewed as a form of insurance – a practical and effective way to safeguard your assets.
- It can minimise or help to avoid the potential emotional and financial cost of a relationship breakdown (as the title suggests, a breakup can be very expensive!!)
- It can provide reassurance that your partner ‘loves you for you, and not your money’.
- It can ensure long-term estate planning goals are maintained even after a breakup – i.e. it can be written into a BFA that children are provided for.
Potential Disadvantages of a Binding Financial Agreement
- You may need to endure an awkward conversation that you would desperately prefer to avoid.
- It may lead to trust issues in your relationship (especially in relatively new relationships).
- You may potentially give up your right to inherit from your partner’s estate or their family’s estate.
- Legal fees involved in drafting the relationship agreement can be costly.
These disadvantages, however, are typically far outweighed by the benefits. And it is not uncommon for BFAs to contribute to a more stable and secure relationship.
IMPORTANT NOTE: Ensure decisions within your Binding Financial Agreement are reviewed and updated when your circumstances change as it may impact on the effectiveness of the agreement.
