When it comes to protecting your financial interests during a marriage, de facto relationship, or separation, a Binding Financial Agreement (BFA) can be a powerful tool. Often referred to as a “prenup” or “postnup,” a BFA allows couples to set out how their property, assets, and financial responsibilities will be divided if the relationship ends. However, under Australian law, a BFA is only enforceable if certain strict requirements are met—one of the most critical being that both parties receive independent legal advice before signing.
At Jano Family Law, we’ve seen firsthand how a well-drafted BFA can provide peace of mind, and how the absence of proper legal advice can unravel even the most carefully laid plans. In this article, we’ll explore what independent legal advice means, why it’s essential for a BFA, and how it can safeguard your future. Whether you’re considering a BFA or already have one in place, understanding this requirement could make all the difference.
What Is a Binding Financial Agreement?
Under the Family Law Act 1975 (Cth), a BFA is a private contract between two parties, married or de facto, that outlines how their financial affairs will be handled in the event of a separation or divorce. It can cover:
- Division of property, including real estate, savings, and investments;
- Spousal maintenance (or a waiver of it);
- Superannuation splits; and
- Other financial arrangements.
BFAs can be entered into before a relationship (prenuptial agreements), during a relationship, or after separation. They offer a way to bypass the Family Court’s discretionary powers, giving couples certainty and control over their financial outcomes. However, for a BFA to be legally binding, Section 90G (for married couples) or Section 90UJ (for de facto couples) of the Act imposes strict conditions—one of which is independent legal advice.
What Does “Independent Legal Advice” Mean?
Independent legal advice (ILA) isn’t just a formality; it’s a cornerstone of a BFA’s enforceability. In the context of a BFA, ILA means that each party must consult a qualified lawyer who:
- Is not representing the other party (i.e., truly independent);
- Provides advice tailored to that individual’s circumstances and interests; and
- Explains the legal implications, advantages, and disadvantages of signing the agreement.
The lawyer must then provide a signed certificate confirming that this advice was given, which is attached to the BFA. This requirement exists to ensure both parties fully understand what they’re agreeing to and that the process is fair.
For example, imagine a couple where one partner owns a multimillion-dollar business while the other has minimal assets. Without ILA, the less-wealthy partner might unknowingly sign away rights to a fair property settlement. The law seeks to prevent this by mandating separate, impartial advice.
Why Is Independent Legal Advice Required?
The requirement for ILA isn’t just a bureaucratic hurdle—it serves several critical purposes:
- Protecting Against Coercion or Duress
A BFA must be entered into voluntarily. Courts have set aside agreements where one party was pressured or misled into signing. ILA helps ensure that each person understands their rights and isn’t acting under duress. For instance, in the landmark case of Thorne v Kennedy (2017), the High Court invalidated a BFA partly because the wife received inadequate advice and faced significant pressure to sign. - Ensuring Informed Consent
A BFA often involves waiving rights you’d otherwise have under the Family Law Act, such as a claim to spousal maintenance or an equitable property split. Without understanding these trade-offs, you can’t give true consent. Your lawyer’s job is to break down the agreement’s terms and explain what you’re giving up, or gaining. - Making the Agreement Enforceable
If a BFA doesn’t meet the legal requirements, including ILA, a court can declare it non-binding. This could leave you exposed to costly litigation later. At Jano Family Law, we emphasize this point to clients: skipping proper advice now could mean losing control over your finances down the track. - Promoting Fairness
While a BFA doesn’t have to be “fair” in the eyes of the court, the process of obtaining ILA helps level the playing field, especially when there’s a power imbalance (e.g., differences in wealth, education, or bargaining power).
What Should Independent Legal Advice Cover?
When you meet with a family lawyer for ILA on a BFA, expect a proper legal service. At a minimum, your lawyer should:
- Review the Agreement: Examine every clause to ensure you understand its implications.
- Explain Your Rights: Outline what you’d be entitled to under the Family Law Act without the BFA, so you can compare.
- Assess Advantages and Disadvantages: Highlight how the BFA benefits or disadvantages you, both now and in the future.
- Discuss Alternatives: Suggest changes if the agreement seems unfair or unclear.
- Warn About Risks: Flag potential issues, like changes in circumstances (e.g., having children) that might affect the BFA’s suitability.
For example, if the BFA waives your right to spousal maintenance, your lawyer should explain how this could impact you if your financial situation deteriorates. At Jano Family Law, we take pride in giving clients clear, practical advice that empowers them to make informed decisions.
Common Pitfalls to Avoid
Even with ILA, mistakes can jeopardize a BFA’s validity. Here are some pitfalls to watch out for:
- Using the Same Lawyer
It might be tempting to save costs by sharing a lawyer, but this defeats the “independent” requirement. Each party must have their own solicitor. - Rushed or Inadequate Advice
A quick chat won’t cut it. Courts have invalidated BFAs where the advice was cursory or didn’t fully explore the agreement’s impact. In Hoult v Hoult (2013), the court emphasized that ILA must be meaningful, not a rubber stamp. At Jano Family Law, we confirm our legal advice in writing, so there is no debate later about what advice was provided. - Signing Before Advice
You must receive ILA before signing the BFA. Signing first and seeking advice later renders the agreement vulnerable to challenge. - Ignoring Changes in Circumstances
A BFA drafted years ago might not hold up if your situation has drastically changed (e.g., significant asset growth or health issues). Regular reviews with your lawyer can help.
The Process of Getting Independent Legal Advice
So, how does it work in practice? Here’s a step-by-step guide:
- Draft the BFA: Typically, one party’s lawyer prepares the initial draft, often after discussions between the couple.
- Engage Separate Lawyers: Each party appoints their own family lawyer.
- Provide Full Disclosure: Both parties must share complete financial information (e.g., asset values, debts) so the advice is based on accurate data.
- Receive ILA: Meet with your lawyer to review the BFA and ask questions.
- Sign the Certificate: Your lawyer signs a statement confirming they’ve provided ILA, which is attached to the agreement.
- Finalize the BFA: Both parties sign the document, and it becomes binding.
At Jano Family Law, we guide clients through this process with care, ensuring every step complies with the law and protects your interests.
Can a BFA Be Challenged Even With ILA?
Yes, a BFA can still be challenged, though proper ILA significantly reduces the risk. Grounds for setting aside a BFA include:
- Fraud or non-disclosure of assets;
- Duress, undue influence, or unconscionable conduct;
- Significant changes in circumstances (e.g., the birth of children) that make the agreement impractical;
- Failure to comply with legal formalities.
ILA acts as a shield against many of these challenges by demonstrating that both parties entered the agreement knowingly and willingly.
Why Choose Jano Family Law?
Navigating a BFA can be complex, but you don’t have to do it alone. At Jano Family Law, we specialize in family law matters across Australia, with a deep understanding of BFAs and the importance of ILA. Our team is committed to:
- Providing clear, independent advice tailored to your unique situation;
- Drafting or reviewing BFAs that stand up to scrutiny;
- Helping you secure your financial future with confidence.
Whether you’re in Sydney, Melbourne, or beyond, we’re here to assist. Contact us at www.janofamilylaw.com.au to discuss your needs today.
Final Thoughts
A Binding Financial Agreement can be a game-changer for couples seeking certainty in uncertain times. But without independent legal advice, it’s little more than a piece of paper. The requirement for ILA ensures fairness, clarity, and enforceability—protecting both parties now and in the future.
If you’re considering a BFA, don’t cut corners. Seek expert advice from a qualified family lawyer to ensure your agreement is rock-solid. At Jano Family Law, we’re passionate about helping our clients make informed choices that stand the test of time. Ready to take the next step? Reach out to us, we’ve got your back.