Checklist When Making a Binding Financial Agreement
Couples who are about to enter marriage or a de facto relationship can agree on how to go about their finances by making a binding financial agreement
A binding financial agreement (BFA) is part of the financial planning for a couple who may either be married or in a de facto relationship. There are many things to consider when entering into a new relationship and one of the most important is finances.
Checklist of questions when considering a BFA
Whenever a person is about to enter into a new relationship, whether that be marriage or de facto relationship, he must mull over matters concerning the impact of the relationship on his finances. A BFA can clear any financial issues between the parties. However, one must ask first the following questions:
- The first question is if you are previously divorced or separated. You might still have financial responsibilities from these previous relationships that you must take into account before getting married again or entering into a new de facto relationship.
- Do you have children from former relationships? Are you paying for child support? Remember that the duty of financially supporting a child does not cease when you enter into a new relationship. You might want to reserve some of your assets or income for the payment of child support.
- Make an inventory of your assets and ask yourself if these are significant. Do you own real estate? Do you have luxury vehicles? Do you have heirlooms? People with assets that are substantial in value seek the protection of a BFA so that these properties will remain intact.
- Are you financially stable? Do you still have income earning capacity? Unless there is an express stipulation to the contrary, the income that a person earns becomes jointly owned in a marriage or de facto relationship. Spousal maintenance is one of the subjects that the parties may agree about in a BFA. One of the factors to be considered in the award of spousal maintenance is the capacity to pay. If let’s say, you have low earning capacity it would be wise to stipulate for a spousal maintenance that is not too high. On the other hand, if you plan to let go of your work to focus on the relationship then you should make sure that spousal maintenance is included in the BFA because you will be losing your earning capacity.
- Have you received significant inheritance or gifts? Do you expect to have future inheritance? There are some parties to a marriage or de facto relationship that prefer to keep their ownership over inheritance or gifts received before and during the relationship. A BFA will help a party in ensuring that he retains ownership over inheritance and gifts.
- Finally, have you and your beloved agreed on how to divide your assets, income and financial resources during and after your relationship?