The divorce rate in Australia is still quite high, and statistically you have a 1 in 2 chance that your relationship will end prematurely. As a doctor, you will accumulate a significant asset base throughout your career, and so it makes perfect sense to protect yourself in the event of a relationship breakdown. So let’s have a look at how doctors and divorce can have a reasonably good financial outcome.
What is a Binding Financial Agreement or BFA?
The Family Law Act allows married, de facto and/or same sex couples to enter into legally binding financial agreements with respect to their property. A Binding Financial Agreement (or sometimes colloquially called a ‘pre-nup’) can be entered into at three stages:
• before the relationship/marriage; • during the relationship/marriage; or • after separation.
A Binding Financial Agreement (“BFA”) specifies how, in the event of the breakdown of the relationship, all or any of the property or financial resources of either or both of the parties is to be divided. A BFA can also be used as a tool in the appropriate circumstances, preventing future spousal maintenance applications. The spouses are then, subject to certain exceptions, prevented from making an application to the Court for orders relating to the property dealt with in the BFA.
A BFA can cover all of the property of the parties, or it can deal with specific assets. For example, the BFA might specify what happens to all assets (owned prior to the relationship and acquired during the relationship) in the event that separation occurs. Alternatively, the agreement may only specify what is to happen to property owned prior to the relationship commencing.
Requirements of BFA
A BFA must comply with strict requirements of the Family Law Act. To be binding and enforceable, the following requirements must be complied with:
• the agreement must be signed by all parties; • before signing the agreement, each party must be provided with independent legal advice from a legal practitioner. The legal practitioner must provide advice about the effect of the agreement on the rights of that party, and about the advantages and disadvantages of entering into the agreement.
If the above requirements are not strictly complied with, it is open to the Court to set aside the BFA.
Should you consider a Binding Financial Agreement?
For parties currently in a relationship, or about to enter into a relationship, a BFA is the only option should you wish to determine how property is to be divided following separation.
Yet, very few people take the step of implementing a BFA. The two main reasons for this are:
– cost, as it can be anywhere from $8-10,000 and upwards to have an agreement drafted; – being uncomfortable to have this confronting conversation with your spouse.
Despite these objections, I would say it is one of the most important legal documents doctors should prepare. The alternative, having to potentially navigate a lengthy and costly divorce settlement is even less attractive.
My opinion on doctors and divorce? I strongly recommend you seek legal advice when entering into a new relationship, or when you have any concerns about the future of your current relationship. I have a network of professional family lawyers I can refer you to.
About Yves Schoof
I specialise in medical financial planning and coordinating the financial affairs of medical professionals. I have been recognised as one of the Top 10 financial planners in Perth and Australia. I am a Certified Financial Planner and member of the Financial Planning Association of Australia. As I understand your time is extremely valuable and scarce, I am able to offer flexible meetings times, including outside business hours and during the weekend. I can even come and meet you somewhere convenient, or talk via videoconference on Skype. My first consultation is free. I allocate up to 90 minutes to discuss your personal circumstances and to establish how I may best assist you. Where you already have an existing adviser, I would be happy to offer a second opinion. I always quote a fixed dollar fee before we start working together. Please contact me on email@example.com or call me direct on 0432 885 295. You can follow me on Twitter @YvesSchoof or connect with me on Linkedin to receive new articles.
Yves Schoof and Affluence Private Wealth are Authorised Representatives of Synchron, AFS Licence No. 243313. The information posted is intended to be general in nature and is not personal financial product advice. It does not take into account your objectives, financial situation or needs. Before acting on any information, you should consider the appropriateness of the information provided and the nature of the relevant financial product having regard to your objectives, financial situation and needs. In particular, you should seek independent financial advice and read the relevant product disclosure statement (PDS) or other offer document prior to making a decision.
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