It may be awkward, but a BFA could save your relationship (and wallet)

For anyone planning a major, exciting life milestone this year – like moving in with a partner, getting married or starting a family – thinking about a binding financial agreement (BFA) is probably not high on the list of things to do.

Yet, it very much should be.

Having something concrete and legally binding in place can protect everyone involved from a potentially devastating family law dispute down the track.

It might feel awkward, but speaking to your partner about money early on can prevent things getting nasty.Credit: istock

And while no one starting a new relationship really wants to think about how things might end, having a conversation about financial matters and the ownership of assets at the beginning could prove invaluable.

What are binding financial agreements?

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Binding financial agreements (colloquially known as “prenups”) have been part of the legal landscape in Australian for 25 years and are designed to provide certainty and control over financial matters.

In most instances, a BFA is typically created to protect people who have acquired a certain amount of wealth or assets before the start of a relationship. However, they are open to anyone who wishes to agree, ahead of time, how wealth accumulated during a relationship is to be divided to avoid the uncertainty and angst after a separation. At that point, there is enough to worry about.

To ensure a BFA is binding, under Australian law, it is mandatory for each partner in the relationship to obtain independent legal advice, with statements of advice from each legal representative inserted into the agreement.

Who uses BFAs?

Far from being a tool for the ultrarich, these legal contracts are becoming more commonplace, as a device to help avoid ugly court confrontations should things turn sour.

Childless couples who plan to marry or enter into a de facto relationship may want to set boundaries around how their assets, debts and earnings will be divided should things end in separation or divorce.

If 2026 is shaping up as a landmark year for you, be sure to seek advice on whether a BFA could be a good fit.

During a marriage, one partner may receive a significant windfall or inheritance, which they could want to protect through a BFA. Couples with children from previous relationships and in a new romantic partnership might decide a BFA is the best option for creating certainty around children’s inheritances.

Increasingly, younger people who have experienced acrimonious family matters are seeking out BFAs to future-proof their finances.

Are BFAs watertight?

It is crucial to understand that while these agreements can be drafted with the utmost precision, it is still possible for BFAs to be challenged in court.

Like any other type of contract, a BFA can be set aside if certain criteria are met, and is subject to interpretations of law, and changes to laws because of societal expectations and pressures.

Under the Family Law Act (1975) a BFA can be set aside if, for example:

• It was fraudulently obtained, including with non-disclosure;
• It is voidable or unenforceable;
• It is impractical for all or part of the BFA to be carried out;
• There has been a significant change in the care of a child, leading to hardship if the agreement remains in place;
• One party (especially those in the superior financial position) engaged in unconscionable conduct.

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A BFA must also be made in compliance with the law governing contracts generally.

Major life changes, such as the birth of a child, or financial windfalls are often the drivers behind updates to a person’s will and BFAs should be no different. Events including a child’s arrival should mean certain provisions are assessed and tweaked, as necessary.

Rather than a draconian and discriminatory legal instrument, these agreements are intended to evolve as a relationship endures, providing transparency and certainty. People should, and do, consider updating them like they do their wills and other important documents.

So, if 2026 is shaping up as a landmark year for you, be sure to seek advice on whether a BFA could be a good fit. Your future self might thank you.

Will Stidston is a family law specialist and principal at national law firm Barry Nilsson.

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their personal circumstances before making any financial decisions.

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