Is a Pre-Nup or Binding Financial Agreement Right for You? A Client Guide

A “pre-nup” is formally known in Australia as a Binding Financial Agreement or BFA. It is a private agreement made under the Family Law Act 1975 (Cth) that records how a couple’s property, financial resources and, in some cases, spousal maintenance will be dealt with if the relationship breaks down.

Despite the nickname, BFAs are not only for people about to marry. They can be made before marriage, during marriage, during a de facto relationship, or after separation. For couples who are currently de facto but may later marry, a BFA can often be drafted to operate in both capacities, so the agreement does not necessarily need to be redone simply because the parties marry.

What does a BFA actually do?

A BFA is designed to operate if you separate. It can set out what each person keeps, what is shared, how jointly owned property will be divided, and whether either party can claim spousal maintenance.

Without a BFA, either party may apply to the Federal Circuit and Family Court of Australia for property orders. The Court has a broad discretion to alter property interests by considering matters such as financial contributions, non-financial contributions, homemaking and parenting contributions, future needs, income disparity and other factors.

A BFA replaces, as far as the law permits, that uncertainty with an agreed private arrangement.

When might a BFA be worth considering?

A BFA may be particularly useful where:

• there are significant assets before the relationship;
• there is an expectation of an inheritance;
• either party owns a business, trust interests, company interests or investment structures;
• there is a significant difference in wealth or income;
• there are children from a previous relationship;
• the parties want clarity about what will happen to property acquired during the relationship;
• where there are third parties involved, who have a stake or interest in property; or
• one party is contributing money to property owned by the other.

A BFA is not only about protecting wealth. It is also about reducing uncertainty, avoiding later disputes and making expectations clear while the relationship is intact.

Separation and death are different events

One of the most important points to understand is that a BFA protects against the consequences of separation. It is not a substitute for estate planning.

If you separate, a BFA can determine how property is divided and whether spousal maintenance is payable.

If you die, your Will, superannuation nominations and estate planning documents determine what happens to your assets. A BFA does not replace a Will. If you die without a Will, your estate may be distributed under intestacy laws, which may produce a very different outcome from what you intended.

In practical terms:

• a BFA protects your position if the relationship ends by separation;
• a Will protects your estate if you die;
• superannuation death benefit nominations direct superannuation benefits;
• enduring powers of attorney protect you if you lose capacity.

For many clients, a proper asset protection strategy requires both BFA and estate planning documents.

Types of BFAs

Many BFAs are built around the distinction between separate property and shared property.

Separate property is property intended to remain the property of one party only. This may include assets owned before the relationship, inheritances, gifts, business interests, superannuation, intellectual property, or property acquired in one party’s sole name.

Shared property is property the parties deliberately acquire or hold together, such as a jointly owned home, joint bank account, or jointly controlled entity.

This distinction is important because property does not necessarily become shared simply because both people live in it, use it, contribute to it, or refer to it informally as “ours”. A well-drafted BFA should clearly define when property is separate and when it is shared.

BFAs can also work to protect specific assets, divide the net assets in a global percentage, or any other agreed way. The type of BFA you choose (or that we recommend) will be based on your objectives and designed to give you certainty about who how you conduct your financial future together.

Financial disclosure is essential

A BFA is not a document to prepare based on rough assumptions. Each party must provide proper financial disclosure, including assets, liabilities, superannuation, business interests, trusts, companies, loans, guarantees, expected inheritances and other financial resources.

Incomplete disclosure can create risk. The schedules attached to a BFA are not mere background information — they are central to the agreement and to each party’s understanding of what they are signing.

Is a BFA always the right choice?

Not always. BFAs require careful drafting, full disclosure and independent legal advice for each party. They can be costly and may not suit every relationship.

However, there is no true binding substitute. Informal notes, text messages, statutory declarations, spreadsheets or verbal promises may help prove what was intended, but they do not prevent the Court from exercising its discretion in a property settlement.

If a BFA is not presently affordable or appropriate, practical steps may still help, like:

·recording assets at the start of cohabitation;

·keeping financial records;

·keeping across your partner’s finances during a relationship;

·documenting loans and gifts properly;

·keeping separate accounts where intended; and

·updating estate planning documents.

The key question

The central issue is not whether the relationship is strong. It is whether both parties want clarity about what happens if circumstances change.

A BFA can be a positive and practical way for couples to start their financial life together with clarity, transparency and shared expectations.

It may be particularly valuable if you want certainty, have assets or family wealth to preserve, expect an inheritance, own business or trust interests, have children from a prior relationship, or simply want to agree clear financial arrangements before your lives become more intertwined.

If you would like to explore whether a Binding Financial Agreement or other asset protection strategy is right for your circumstances, our experienced family lawyers can help. We can provide clear, practical advice tailored to your relationship, financial position and future goals, giving you greater certainty and confidence about what lies ahead.

To discuss your options, contact our team to arrange a consultation.