You can formalise a financial settlement with either Consent Orders or a Binding Financial Agreement (a "BFA"). Most separating couples use Consent Orders.
Consent Orders Give You Certainty
A Consent Order is a decision by the Family Court that your proposed deal is "just and equitable" and that it shall indeed be the deal.
You’ll in effect be ordered by the Court to go ahead and do the things you committed to do.
And your Orders will record the fact that you have no further claims on each other.
Binding Financial Agreements
By contrast, a BFA is a private agreement between the two of you. It does not get reviewed by a Court.
BFAs tend to be used in scenarios where the proposed deal terms are so complex that the Family Court might reject them. Or when it's likely the proportional wealth split would not be seen by the Family court as "just and equitable", even though both parties are prepared to accept them.
You can contractually agree between you to do whatever you want.
To ensure you and your former partner understand what you're signing, however, a BFA is only valid if you both receive legal advice from a solicitor.
You don't have to agree with the solicitor's advice, or act upon it, but you must receive the advice. The solicitor must give you a certificate to say they've provided you with advice about the proposed deal.
When you each have your certificates, you can sign the BFA and that's that. Your deal is formal and binding, and now you must go ahead and do what you just contractually committed to do.
A court will never see the agreement unless (a) one of you challenges the validity of the agreement, or (b) one of you fails to comply with what you committed to do.
So provided you both are honourable and stick to what you committed, a BFA is an OK option.
The Safer and Less Expensive Option
Consent Orders are the more cost-effective way of getting your finances sorted without spending eye-watering sums on legal fees.
And they're generally seen as safer than BFAs, because BFAs can under certain (albeit limited) circumstances be challenged and overturned by a court.
As you can see, Binding Financial Agreements tend to cost more because:
So while BFAs might be suitable for unusual situations, in the majority of cases Consent Orders are a better choice.
If one of you is going to keep the family house or investment property, then the title and mortgage will need to be transferred.
Stamp duty exemptions can be claimed if you have either Consent Orders or Binding Financial Agreements.
Banks usually will require one or the other when they are asked to approve a refinance. That's because a refinance involves a release of one party's obligations. And the bank does not want the remaining party (to whom the title is transferred) to be vulnerable to a future claim by the former spouse.
Both Consent Orders and Binding Financial Agreements allow for superannuation splitting. Superannuation funds cannot execute a transfer without receiving a copy of either Consent Orders or a BFA authorising the transfer.
As mentioned, Consent Orders are court orders.
The federal courts enforce Consent Orders. If your spouse stops complying with a Consent Order, you can ask the court for sanctions and other remedies to compel your spouse to behave.
By contrast, a BFA is a private contract. It can be harder to get enforcement of a BFA. If you ask a court to get involved, the court can form its own view about whether the deal itself is fair, before it decides what should be enforced.
In certain narrowly defined circumstances, the court can override or change the arrangements in a BFA. If the deal is "fair and reasonable" then it is less likely to be overturned. A court is even less likely to overturn the orders in a Consent Order, because those arrangements have already been reviewed and approved by a court.
So if you're worried about whether your spouse will actually do what has been agreed, Consent Orders are a safer option than BFAs.
You can obtain a Consent Order or BFA any time after separation. You don’t have to wait until you’re divorced.
Indeed, once you get a divorce, you usually only have 12 months to formalise a financial agreement anyway. So most couples work out and formalise their financial agreements first and get a legal divorce later.
Getting a Consent Order or a BFA is a bit like buying insurance – protecting yourself for the future.
A formal binding agreement will give you peace of mind and a solid foundation to get on with your life.
How We Can Help
When you are ready to formalise your financial settlement, we can help.
We're one of Australia's largest specialist financial settlement firms. We assist hundreds of couples to prepare Applications for Consent Orders and we handle BFAs where they are appropriate for a few of our clients.
How To Get Started
Since everyone's situation has some unique elements, the starting point is a chat so we can understand what you need to achieve.