When you and your partner separate, deciding how to divide your property, finances, and other assets can be overwhelming.
While there are many ways to manage this process and reach an agreement, there are two options that allow you to legally formalise these agreements in Australia. These are consent orders and Binding Financial Agreements (BFA). Both serve to protect your interests and make your financial arrangements legally binding, but there are key differences between them.
In this article, we'll explore the differences between a Consent Order and a Financial Agreement, and ensure that you have all of the details you need to know about binding financial agreements and consent orders.
What is a Financial Agreement?
A Binding Financial Agreement (BFA) is a private contract made between two parties, either before, during, or after a marriage or de facto relationship. It outlines how assets, liabilities, and financial resources will be divided in the event of a separation. A Financial Agreement does not need to be approved by the Court to be legally binding.
However, for a Binding Financial Agreement to be upheld, both parties must obtain independent legal advice before signing. This ensures that both parties understand the agreement, their rights, and the potential impacts of the agreement on their financial circumstances.
A common question when it comes to this type of agreement is "can a binding financial agreement be overturned?" It's important to note, while a BFA is legally binding, there are limited circumstances under which it can be overturned, such as if there was not full and frank disclosure of financial matters or if one party was pressured into signing.
The cost of a Binding Financial Agreement can be appealing too as they avoid the need for court proceedings, though you do need to seek independent legal advice before entering into one. They provide flexibility and privacy, as they can cover specific financial or property matters based on the individual circumstances of the parties involved.
What is a Consent Order?
A Consent Order is a formal agreement approved by the Family Court, which outlines how property, assets, and even parenting matters will be divided or handled after a separation. Unlike a Binding Financial Agreement, a Consent Order must go through the court to become legally binding, but there is no need for a court hearing. The proposed Consent Orders are submitted to the court, and a judge reviews them to ensure that the division of property and other financial matters is fair and reasonable.
One of the key advantages of a Consent Order is that once the court approves it, it carries the weight of a court order, meaning it is enforceable. If one party fails to comply with the Consent Order, the other party can ask the court to enforce the terms or apply penalties. Consent Orders are often chosen when both parties are on the same page and want a legally enforceable agreement without the need for a lengthy court process.
Consent Orders can be used for dividing property, spousal maintenance, and other financial matters, making them a secure option when both parties want certainty and enforceability.
Consent Order vs Financial Agreement: What's the Difference?
While both Consent Orders and Binding Financial Agreements (BFAs) serve the same general purpose—settling financial matters and property division after a separation—they have different processes and implications. The key distinction lies in the level of court involvement and how each agreement is enforced.
In the following section, we'll explore 5 of the key differences between Consent Orders and Financial Agreements, helping you understand which option might be better suited to your situation.
Key Differences: Consent Order vs Financial Agreement
When deciding between a Consent Order and a Binding Financial Agreement, it's important to understand their differences. So, binding financial agreement v consent orders – here's what sets them apart:
Court Involvement
A Consent Order must be submitted to the Court for approval. The Court reviews the agreement to ensure that it's fair and reasonable based on the financial circumstances of both parties.
In contrast, a Binding Financial Agreement is a private contract between the parties and doesn't require court approval to be legally binding. This means BFAs are not automatically enforceable by the court unless a dispute arises.
Scope of Agreement
Consent Orders can cover both financial matters and parenting matters (such as custody and visitation), making them a more comprehensive option when children are involved.
Binding Financial Agreements, on the other hand, focus solely on financial or property matters, like dividing assets and liabilities or spousal maintenance.
Enforceability
A Consent Order is backed by the authority of the court, meaning it carries the same weight as a court order. If one party fails to comply, the other can apply to the court for enforcement.
A Binding Financial Agreement is enforceable, but any breach must be resolved through litigation, which can be more complicated than enforcing a Consent Order.
Fairness and Equality
Consent Orders require court approval, ensuring that the terms are fair and reasonable for both parties, based on their financial circumstances. The court reviews the agreement to prevent any imbalance or unfair treatment.
In contrast, a Binding Financial Agreement does not go through court approval. Instead, each party must obtain independent legal advice before signing to confirm that they fully understand the terms and the potential consequences. While this allows for more freedom in negotiation, there is no external court review for fairness.
Flexibility
Binding Financial Agreements offer more flexibility in terms of the financial arrangements they cover and how they are structured. Since they don't need court approval, parties can negotiate terms more freely.
In contrast, Consent Orders are subject to the court's review, and the judge must agree that the terms are just and equitable.
Consent Order vs Financial Agreement: Which is Better?
Choosing between a Consent Order and a Binding Financial Agreement (BFA) depends on your needs and circumstances. A Consent Order offers the certainty of court enforcement, making it a great option if you want legal backing or have parenting matters to resolve.
On the other hand, a Binding Financial Agreement gives you more privacy and flexibility, allowing you to create a tailored solution without court involvement. It's a practical choice if you and your ex-partner want to avoid the formalities of court but still need a legally binding agreement.
Both options exist to provide solutions that fit different situations, ensuring that there's a legal framework suited to your unique circumstances.
When to Choose a Binding Financial Agreement (BFA)
A Binding Financial Agreement is a great option in a variety of situations, such as when:
- Privacy is important to you, as BFAs don't require court involvement, meaning the terms of your agreement remain private.
- You and your ex-partner can come to an agreement on how to divide your assets and financial resources without needing the formal oversight of the Family Court.
- You want more flexibility in how you arrange your financial matters. A BFA allows the parties involved to negotiate the terms that suit their specific needs.
However, it's important to remember that a BFA must meet strict legal requirements to be enforceable, including the need for both parties to obtain independent legal advice. Additionally, while BFAs are legally binding, they are not as immediately enforceable as Consent Orders if one party fails to comply.
When to Choose Consent Orders
Choosing a Consent Order is ideal when you want the certainty and enforceability that comes with court approval. You might want to choose a Consent Order if:
- You want your agreement to be backed by the Family Court, ensuring it's legally binding and enforceable.
- You have both financial matters and parenting matters to resolve. A Consent Order can address both in a single document, offering a comprehensive solution.
- There are concerns that one party may not comply with the terms of the agreement. Since a Consent Order has the authority of a court order, it provides more protection if the other party fails to follow through.
- The financial settlement is complex, and you want the court to ensure the agreement is fair and reasonable.
While the Consent Order process involves court approval, it doesn't usually require a court hearing, making it a straightforward way to formalise your separation agreement without the need for long legal proceedings.
How We Can Provide Assistance: Consent Order vs Financial Agreement
At Unified Lawyers, we help clients navigate the complexities of Consent Orders and Binding Financial Agreements (BFAs). Our consent order and binding financial agreement experts are here to guide you and we handle everything from drafting and reviewing agreements to providing the independent legal advice needed to make your agreement legally binding and compliant with the Family Law Act.
If you're unsure which option is right for you, our experienced team is here to help you make the best choice for your situation.
Always Seek Legal Advice
Whether you're considering a Binding Financial Agreement or a Consent Order, it's crucial to obtain independent legal advice before making any decisions. These agreements have significant legal and financial implications and failing to get proper legal advice can leave you vulnerable to future disputes or claims.
By seeking legal advice early, you can avoid common pitfalls and ensure that your agreement is properly structured to suit your unique circumstances. At Unified Lawyers, our experienced team can guide you through every step of the process, providing the legal knowledge you need to make informed decisions about your financial future.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.