Binding Financial Agreements vs Consent Orders: What You Need to Know After Separation

When separating, deciding how to divide your assets can be challenging. There are two common legal pathways to formalise property settlements in Australia without requiring a court decision: Binding Financial Agreements (BFAs) and Consent Orders. Understanding the differences between these options can help you determine the best approach for your situation and to understand the options your lawyer may discuss with you. Here’s a breakdown of each option and their respective advantages and disadvantages.

 

Binding Financial Agreements

What Are They?
A Binding Financial Agreement is a private contract created under the Family Law Act 1975. It can be entered into by either de facto or married couples, after separation and even after a divorce is granted

To ensure enforceability, BFAs must adhere to specific legal requirements, such as:

• Being in writing and signed by both parties;
• Each party obtaining independent legal advice before signing;
• Legal practitioners providing signed statements confirming they have given advice;
• A declaration of separation.

Advantages of BFAs:

1. Proactive Planning: BFAs can be created at any point, offering flexibility and planning opportunities.
2. Privacy: These agreements do not require court involvement, ensuring confidentiality.
3. Peace of Mind: Particularly beneficial for individuals with significant assets or complex finances, BFAs provide clarity and security.
4. Tailored: When individuals have a more complicated goal in their separation, such as businesses, trusts, a self-managed superannuation fund or children from previous relationships, a BFA allows you to more flexibly address your specific intentions in a way that is acceptable to both individuals but which a court may not consider just.

Disadvantages of BFAs:

1. Expense: The cost of drafting and finalising a BFA can be higher, particularly if the financial situation is intricate.
2. Relationship Dynamics: Discussing a BFA during a relationship may create tension or misunderstandings and BOTH parties are required to see a lawyer.
3. Rigidity: Courts are generally reluctant to overturn BFAs, even if they later appear unfair to one party.
4. Uncertain Precedents: There is limited case law on BFAs, leaving some aspects of their enforceability less predictable.

Consent Orders

What Are They?
Consent Orders formalise an agreement about property division by submitting it to the Federal Circuit and Family Court of Australia for approval. Once the court approves the agreement, it becomes legally binding.

Advantages of Consent Orders:

1. Affordability: Typically less costly than BFAs, particularly for straightforward property settlements.
2. Court Oversight: Ensures the agreement is fair and legally sound.
3. Enforceability: Once approved, the agreement has the force of a court order.
4. Efficiency: In simple cases, parties can avoid appearing in court, streamlining the process.

Disadvantages of Consent Orders:

1. Limited Timing: They can only be used after a separation or divorce, there is no option during the relationship and no ‘pre-nup’ equivalent.
2. Time limits: Unless they ask for the court’s approval, married parties have to submit their application within 12 months of a divorce and de facto parties must do it within 24 months of separation.
3. Approval Process: If the court finds the agreement to be inequitable or incomplete, it may reject the application, requiring revisions.
4. Simpler Scope: While effective for straightforward cases, Consent Orders may not address intricate financial arrangements as thoroughly as BFAs.

Which Option Is Right for You?

Choosing between a Binding Financial Agreement and Consent Orders depends on your unique circumstances:

• Consent Orders work well for simple, post-separation property divisions. They are cost-effective and provide the reassurance of court approval.
• Binding Financial Agreements are ideal for:
  • Addressing large or complex asset pools;
  • Dividing a property pool after the legislative time limit has passed, without requiring the court’s approval;
  • Avoiding court involvement entirely, ensuring privacy.

No matter which option you pursue, independent legal advice is crucial to safeguarding your interests and ensuring the agreement is appropriate for your situation.

Next Steps

If you’re preparing for mediation or close to reaching an agreement, now is the time to discuss your options with your lawyer. At Umbrella Family Law, we specialize in helping clients navigate these decisions with clarity and care. Whether you choose a Binding Financial Agreement or Consent Orders, our team will ensure your property settlement is handled effectively.

For more information, reach out to your lawyer or contact us at the team@umbrellafailylaw.com.au.