In Family Law, a binding financial agreement (BFA) is a written agreement made in accordance with the provisions of the Family Law Act 1975. A BFA is entered between the parties of a relationship to determine the division of assets and financial resources after separation. A BFA provides clarity regarding division of assets and leads to a much more amicable property settlement in comparison to a long drawn litigation process.

Spousal Claims against Estates: Effect of BFA

Even though a BFA is formulated with the intent of finalising property and financial arrangements, it is often found that the spouse who is unhappy with the Will of the deceased, files for a Family Provision claim. The jurisdiction of the Court to entertain such a claim and make a Family Provision Order is not completely extinguished by the mere presence of a BFA. A BFA may include a clause that each party releases the other party’s estate. But Section 95 of the NSW Succession Act, 2006 only allows a person to release their right to apply for such an Order on the approval of the Court. The solicitor on behalf of the estate may defend the BFA and propose to have the clause approved by the Court but the approval is granted only if:

The BFA or any agreement was advantageous financially or otherwise to the releasing party;

It was a prudent decision to forego;

The provisions of the BFA or any agreement were fair and reasonable; and

The releasing party obtained independent legal and professional advice.

The Family Provision claims have been of particular unease to Will makers as it nullifies to an extent, the entire purpose of making a Will. The reach of spousal Family Provision claims have been further increased from 1 March 2009 by the inclusion of de facto partners and same-sex couples within the definition of ‘spouse’, by an amendment to the Family Law Act, 1975.

Judicial Decisions

In Queensland, in Hills v Chalk [2008] QCA 159, the Court had upheld that the provisions of BFA entered into by the parties before marriage was for determining that the widow could not make a claim on her late husband’s estate.

On the contrary, in Neil v Jacovou [2011] NSWSC 87, the Court carefully scrutinised the circumstances surrounding the BFA and found that the independent legal advice sought by the widow was not proper and her entitlement was not fair and reasonable. The Court found that the release of the right to apply for a Family Provision claim was not for the widow’s benefit and proceeded to entertain her Family Provision claim.

Future Considerations

A BFA is entered into with the purposes of attaining certainty. But it should also be drafted with precision so as to clearly state your intention. It should also be noted that the BFS needs to be fair and reasonable to the surviving spouse and should be considered acceptable before the Court while determining whether the BFA supersedes in the matter of entertaining a Family Provision claim.

Before entering into a BFA, you may contact our team of experts at Owen Hodge Lawyers to ascertain and evaluate your rights.

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Spouses Claims Against Estates Using Binding Financial Agreements
Two Stage Process pf Family Provision Claims
Family Provision Act allows Wills to be contested
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