Safeguarding Your Future: How Single Mums Can Protect Their Assets with Binding Financial Agreements
September 9, 2024 • 30 mins
Hey there! 🌟 Ready for another uplifting episode of Beanstalk Mums? This time, we're joined by Ian McLeod, a financial expert with nearly 20 years of experience, who’s here to talk about Binding Financial Agreements (BFAs) and why they’re so crucial for single mums.
In this episode, Ian shares how BFAs can protect your assets, safeguard your financial future, and help you avoid conflict when dividing property after a separation. Whether you’re stepping out of a relationship or entering a new one, Ian’s practical advice will give you the confidence and clarity you need to take control of your finances. 💪💰
Pop in those earbuds hit play, and get ready to boost your financial savvy with real-world advice that’s easy to understand and put into action. 🙌 We’ll also cover how to take the next steps if you're considering setting up a BFA.
Links for this episode:
📧 https://www.financialagreements.com.au — Want more info? Reach out to Ian for personalised help.
👯♀️ https://www.facebook.com/groups/SingleMumVine — Don’t forget to join the Single Mum Vine on Facebook! It’s the perfect spot to connect with fellow single mums for support and advice.
🎙️ https://beanstalkmums.com.au/podcast — Our brand-new widget is live on the Beanstalk Mums website! Drop us a voice message with your thoughts or questions, and you might hear them in a future episode.
You’ve got this! Let’s thrive together. 🌈 And don’t forget to like and follow the podcast so you never miss an episode packed with inspiration and practical tips for your journey! 🎧
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:01):
Welcome to Beanstalk Mums podcast. Here at Beanstalk Mums, we believe that every
mum is a powerhouse of potential and strength.
Our mission is to uplift, empower and support single mums on their incredible journey.
Each episode is packed with inspiring stories, practical advice and expert insights
(00:21):
tailored to help you tackle the unique challenges and triumphs of single motherhood.
Join a vibrant community as we delve into topics that matter to you most.
From financial independence and career growth to self-care and parenting tips.
At Beanstalk Mums, we understand that your journey is as unique as you are.
And we are here to provide a warm, welcoming
(00:44):
space where you can find the encouragement and resources you need.
So tune in regularly and become a part of a network that celebrates your resilience,
wisdom and unwavering dedication. education.
Together we can turn every challenge into an opportunity and every moment into
a stepping stone towards a brighter future.
Welcome to Beanstalk Mums, where your story is our inspiration.
(01:07):
Today we have a special guest, Ian McLeod, a renowned public speaker and expert
in financial agreements for couples.
With nearly two decades of experience, Ian has dedicated his career to helping
individuals navigate their financial futures with clarity and confidence,
specialised in the creation of Binding Financial Agreements,
(01:27):
otherwise known as BFAs.
Ian is practical insights and compassionate approach, making him an ideal guest
for our podcast, especially as we dive into the topic of financial empowerment for single mums.
In this episode, Ian will explore the critical role that financial agreements
play in securing a stable and secure future for single mums.
(01:49):
He will discuss how binding financial agreements can help protect your assets,
manage your finances and avoid potential conflict.
This episode is packed with actionable insights and strategies that will empower
you to navigate the challenges of single motherhood with clarity and confidence.
So stay tuned and get ready to enhance your financial security with expert advice.
(02:11):
Welcome, Ian. Thank you for making the time to talk to us today.
It's really good to have you here. To start, can you help us understand what
binding financial agreements are and why are they crucial, especially for mums?
Okay. Well, thanks for having me, first up. This is a new experience for me.
(02:33):
A binding financial agreement is
essentially an umbrella term for a
document or a legal contract that sets out how your assets and liabilities should
be divided in the event of either a breakdown in your relationship or if your
(02:55):
relationship has already failed.
And so in relation to single mums, they'll either be, they'll be at some stage of a relationship.
You know, if they've just come out of a marriage or de facto relationship,
they may be wondering, well, how do I go about dividing up all our stuff?
(03:15):
And the normal thing is people just run off to a lawyer and start racking up the bills.
That's how it normally happens, okay? I try to discourage people from taking
that path or it might be a...
A mum who's, she's been through the mill, they've settled their property after
(03:38):
the relationship and I'm just going to pull out a scenario here, okay?
You know, let's say, let's say she's come out of the relationship,
she's got a house, she might still have a mortgage, she's got a couple of kids
and she's concerned that if she gets into another relationship,
that house, that property, superannuation, whatever, that could be at risk.
(04:02):
And she wants to preserve that for, say, her children.
So in that case, you can use a binding financial agreement to say,
this is my house, this is my stuff, and we're going to be in this relationship.
We hope for the best, but if the relationship fails, I get to keep my house,
I get to keep my superannuation,
(04:23):
whatever, and you get to keep whatever you've brought to the relationship,
which might be real estate or it might be an old land rover and a boat. Who knows?
So just think of a binding financial agreement as something that you can put
in place at the end of a relationship or at the beginning of a relationship or even in the middle.
(04:45):
So before, during or after a marriage or a de facto relationship.
That's really insightful and it actually triggers a memory of a few questions
like that being asked within a mum's community along the lines of I'm entering a new relationship.
What do I do to protect myself? So that is perfect. That's going to really help a lot of mums already.
(05:06):
And so I wonder if a mum is considering a BFA, how would she go about creating one?
What are some of the key things she should be mindful of?
I need you to give me a bit some scenario here, all right? Because if we're
talking about a separation or we're talking about moving into a relationship.
Oh, can we do both? Both? Yes, of course we can.
(05:28):
So let's start with the separation. So say a mum is separating.
How would she go? Okay, right. So the normal, when you're separating from a
partner, you have some choices to make.
If you can agree with how your property should be divided and you can maintain
those lines of communication, hopefully you can come to an arrangement together
(05:51):
that you're both comfortable with.
Now, if you can get that far, you can then either ask the court to issue a court order.
So what you do is you make an application for orders by consent from the court.
So you're actually making an application to the magistrate and saying,
this is how we want to divide our stuff. Do you think that's fair and reasonable?
(06:14):
Now, if the magistrate thinks that what you want to do is fair and reasonable,
they will make a court order and then you have to follow that court order.
Now, that process can be a bit arduous. It can be a bit uncertain and it can
be costly, particularly if you've got lots of lawyers involved.
If you would prefer to handle things on your own, you can make a binding financial agreement.
(06:36):
So in a binding financial agreement, it's just a contract between the parties
that says, there's, all right, we've decided how to divvy up our property pool.
And before you sign that contract, you must receive legal advice.
So, you can't avoid the lawyers altogether, but you can minimise the amount
of time that the lawyers spend on that matter.
(06:59):
Minimising the cost. Yeah. So, you can minimise that cost by preparing the document yourself.
Our thing is we help you do that. And then we put you in touch with some lawyers
who provide the legal advice in relation to that document so it becomes binding.
So unless you get that legal advice, it doesn't have any binding effect.
It's a worthless piece of paper. Can I answer the question?
(07:22):
Yes, you did. Can I just quickly ask, if it's made binding, can the court still
rule against it if the other party, okay, under what circumstances?
Yeah. Generally speaking, when you set up a binding financial financial agreement,
you have to be open and honest with the other party.
The parties themselves can't make a decision, an informed decision,
(07:45):
unless they know exactly what the other party has in their assets and liabilities.
Just like when you go through court, you have to disclose all of your property to the court,
to the magistrate. So, the magistrate can make an informed decision about how
that property pool should be divided.
When it comes to a binding financial agreement, you still have the same rules
(08:09):
except you have a little bit more control over the outcome because the outcome
is dependent upon you, not the court.
So, you still have to make full and frank financial disclosure to each other,
all right, so you can make an informed decision.
And the lawyers also know what is in your property pool so they can provide informed legal advice.
(08:32):
Under what circumstances will the court, for example, overrule that?
Sorry. Yeah. If you are found that one party has deliberately tried to mislead
the other, all right, then the court can overturn that agreement.
If there's evidence of fraud, the court can overturn that agreement.
If there's evidence of duress, coercion, or what we call unconscionable conduct,
(08:57):
the courts can intervene and overturn that agreement.
But if the parties are open and honest with each other and there's no coercion,
there's no duress, then it's very, very difficult to have that agreement set aside.
Okay. Does that make sense? Yes, absolutely. That's really good.
It may come up as a concern for some mums where they'll go to the extent of
(09:19):
setting up VFA and then when things unfortunately do proceed to court,
the judge might go, well, no, because you've got, say, shared custody now.
So when you make a binding financial agreement, it closes the door to the family court.
So once you've signed that document.
Cannot bring an action in the family
(09:40):
court in relation to whatever you've decided to do in that document.
But you can attempt to have that agreement set aside.
You know, it is your right to have an agreement set aside or request that the
courts set the agreement aside or cancel it if there's evidence of duress,
(10:01):
coercion, particularly family violence or anything like that.
If one partner says to the other, either you sign this or you won't see your
children again, well, that's duress.
That's not agreement.
That's not a genuine agreement. And so under circumstances like that,
the courts would definitely set the agreement aside.
(10:22):
But part of the legal advice is when the lawyers provide their legal advice,
they dig into that sort of issue anyway to make sure that there is a genuine meeting of the minds.
There is no duress you know they're acting their own
free will so you hope that you know by engaging the lawyers
they do that due diligence too and and things are
set as they're supposed to be said yeah and look when when people send their
(10:45):
documents back to us or you know i i make that that quite clear that um you've
got you must have genuine agreement if you haven't got genuine agreement i can't
help that that's good to hear and then so to go back to the original question question,
if the mum was setting up a new relationship,
how would that differ in the way she would go about getting a BFA?
(11:09):
The normal process, you run after the lawyer.
Lawyers will listen to what you have to say.
And then they'll say, come back with all your financials, bank details,
statements, your superannuation statements, deeds for your house, if you have so.
And then they'll take that and they'll put it into a document.
You'll come back have another discussion about that
(11:31):
document and if you're happy that it reflects your your
wishes and your needs at that time they'll instruct you
to give a copy to your partner and then your partner has
to go off and seek legal advice once both parties have received legal advice
you can then sign the agreement and it will be binding after the solicitors
have provided a certificate so the solicitor has to provide a certificate that
(11:55):
states they've provided a certain legal advice in relation to that document.
When you've both got a certificate, you can sign that document and it becomes binding.
The way we work is I'm not a lawyer. I'm not even legally trained.
I just happen to be involved in a business where binding financial agreements
have absorbed the information by osmosis.
(12:18):
So I have a relationship with a number of lawyers,
five who are happy to provide the
legal advice in relation to a document that has
been drafted from a kit that we provide so we provide
a kit through our website in relation to separation or
before relationship whatever the case may be and
(12:38):
so you complete that document yourself send
it back to me and my job is then to act as
a conduit between the customer and the
lawyers so I have to then fine-tune that document so the lawyers can work with
it and work with it quickly and efficiently my job is to make the lawyer's job
easy does that make sense yeah absolutely absolutely and of course everyone
(13:02):
knows the less time you spend using a lawyer's time.
Uh it ends up being beneficial for everyone not so much for the lawyers but
uh yeah well that's That's all they can charge for, you know.
It's not like a motor mechanic who, you know, charges for his time and the spare parts.
All the lawyers got, all they have is their time. And they're quite often under
(13:24):
a lot of pressure to make sure that they're charging the appropriate number
of billable hours. So...
The process we have keeps that to a minimum. It's brilliant.
Well, there's definitely a lot to consider when going down that route.
And it does seem that your way is a lot more streamlined and financially viable.
(13:47):
Tell me though, are there any
common misunderstandings or myths that are around financial agreements?
Is there anything that these agreements can't protect you? Yes.
If we were talking about a separation, people will often want to include issues
relating to children in their binding financial agreement.
(14:09):
A BFA is just for dividing your property.
You can't include provisions that relate to the care and welfare of children in a BFA.
So you couldn't put in like child support payments or anything like that into like a guarantee?
No, unfortunately, the child support is governed by the Child Support Assessment
(14:32):
Act, which is a different section of the law.
Financial agreements or binding financial agreements are governed by the Family Law Act.
So different playing fields, provisions that relate to children.
You know, people might want to put in there, who's going to have the children
at Christmas or on Father's Day or whatever the case may be.
(14:52):
Okay if there's a dispute about children
who they should be spending time with all right
can't sort that problem out in a contract or an agreement if you have a dispute
it can only be resolved through the court system unfortunately and and then
things around the children to the time as you've mentioned that tends to be
(15:14):
governed by the parenting orders and our parenting agreements agreements,
the orders being set through the court, as you've mentioned.
So, again, that's just completely around...
The assets or the financial assets that you are stepping in to a relationship
with or wanting to leave the relationship with.
Does that include your super and things like that?
(15:37):
Yeah. Yeah. You can split, you can divide super with a binding financial planner.
Yeah. You can certainly divide super. It requires that very specific provisions
be placed in that document and it has to go off to the trustee of the super
fund before the lawyers would normally get involved,
(15:57):
in our case anyway, under normal circumstances.
You know, if you do this through a law firm, it can be very expensive to split superannuation.
It's only a matter of a few extra paragraphs and getting those paragraphs approved
before you get the legal advice.
Thinking through how to ensure that the mum's financial agreements are both
(16:17):
fair and protective of their assets in a way to include as much as we can in there.
So super being one of those things, obviously future income potentially,
not child support payments, not the upkeep of a child that does not go in.
What other assets could potentially go into that agreement besides say the house and the car?
(16:41):
It's not common, it's not common, but sometimes people include their pets.
Because pets are actually property.
Wow. So sometimes people will say, well, you know, one partner will get the care of… Gosh.
Spot, right? Oh, Lord. I would have thought that's a parenting order.
(17:03):
Well, sometimes people treat their pets like children, but they're actually seen as property.
What else? What else? Yeah, like their share portfolios, real estate, business interests.
Right. You know, you might have your own business.
It falls within the property pool. You know, you might have a family,
(17:26):
you might have a company and a family trust,
which is all in the property pool, but those sorts of things you might want
to say, he's going to keep his control of the family trust for the benefit of
the kids, right, or, you know, the other partner's going to keep control.
It's up to the individuals to decide themselves what is.
(17:47):
Generally, if it's worth more than about $5,000, dollars it's it's considered
something that should be included in the in the property pool.
When we think about the mum that said it's starting up a new relationship down
the track can she potentially safeguard herself for any windfalls so if she
wins the lottery or if her grandmother passes away or any sort of that can also
(18:09):
be included and would that be an extra clause or?
No, in those documents, we define specific terms.
One is separate property and what is joint property.
So just to be clear, we're now talking about an agreement in an ongoing relationship
where we want to set out what's yours and what's mine.
(18:32):
So we define separate property.
Separate property is any property that you already have and own that you've
listed in your assets and liabilities schedule within the document.
But it's also any superannuation interest in your name that you've either accumulated
prior to or after the relationship or after the date of the agreement rather.
(18:57):
Any bank account that's in your name alone.
If it's real estate, you want to buy another investment property if you're in that sort of position.
If it's in your name alone and the mortgage is in your name alone,
then it is your separate property.
If you have a windfall or a redundancy payment from work or an inheritance,
(19:20):
that's all classified as your separate property.
Joint property is anything that you already set out as joint property so that
you have another schedule in the document where you list your joint property,
which might be the a big screen TV and a car or a joint savings account or whatever the case may be.
If you cannot define something as separate property, then it would become joint property.
(19:46):
Does that make sense? Yes, yes, it does. So far? Okay.
And so in the event of separation, you each get to keep your separate property
and you divide equally any joint property.
So you can define just about anything you want as separate property. you like.
So apart from what the things I've already mentioned, you might say any interest
(20:08):
in a company, any interest in a family trust, something that you set up in the future.
And you look and you will often have people who come to us and say,
look, you know, I've got my house.
I want to keep my house, but we want to buy a house together.
We've been, you know, we're sort of heading towards marriage,
but we want to buy a property together, right? So you can then,
(20:31):
Then combine your resources, if you like, and buy that property jointly together.
So an asset that in the event of things go south, you can set out in the agreement
how that new property should be divided.
And it might just be as simple as the house has to be sold and we divide the proceeds equally.
(20:52):
Or it might be a little bit more complex where one partner puts in a bigger
chunk of money to the deposit or something like that.
And then we just have to caress the claws into shape, that extra contribution
is recognised and that extra contribution is paid out in the event of separation.
Does that make sense? Yes, it certainly does. Thank you for clarifying all that.
(21:15):
It's definitely taught me a lot today. Are there any pitfalls that mums should
look out for when negotiating these agreements and how can they avoid them?
The biggest one is not making full and frank financial disclosure.
That's the biggest one. Sometimes people will go, oh, look, do I have to make full disclosure?
(21:35):
Yeah, because I don't really want to tell him about what I've got in the bank
or I don't want to tell him about what's in my super or whatever. And that's a red flag.
If you're thinking, I don't want to tell that person about such and such,
it's probably because they think, well, if they knew that I had this,
they wouldn't want to enter the agreement.
By not disclosing what you have, you create a weakness in the agreement.
(22:01):
You weaken the foundation of that document.
So if it's ever challenged by the court, you may find that it's set aside for
what we call non-disclosure of a material matter. It's a type of fraud.
And so by not disclosing or withholding information that may be pertinent to
the other party's decision about entering that agreement on those terms,
(22:26):
you're setting yourself up for failure.
And that makes absolute sense. It sounds like it would make the whole agreement non-void.
So it almost negates paying all that money to have it put in place in the first place.
So that makes absolute sense. A lot of what you're saying really heavily weighs
on two parties being able to communicate amicably.
(22:49):
Yes. When you're recoupling, there are completely different emotions are running
wild, and those are good emotions, and they don't tend to hinder things,
although they might sort of
cloud someone's judgment as to protective they should be of their assets.
But on the other spectrum, when you are separating, you have a lot of hurt and
(23:09):
a lot of negative emotions.
So you already mentioned that your service is different to the lawyers.
You assist the lawyers to do their job quickly.
Is there a way that you potentially assist in situations where the emotions are high?
So do you support your clients through the emotional side of things while navigating,
(23:30):
these agreements? I try to stay out of it.
It's not my wheelhouse. If people are having emotional difficulties,
communicating with the other side, or there's tensions are running high,
I can't really assist with that.
You know, what they really should do is seek some counselling,
(23:51):
go to mediation, do anything but run off to the lawyers.
Because running off to the lawyers at times like that is just like,
I liken it to going out and hiring a sellsword. it.
You want somebody to go and slay the dragon for you, right?
And they'll do their best to slay the dragon for you, but it will cost and it
(24:14):
escalates the tension, right?
Because it's so easy to hide behind your lawyer who sends a curt email off to your partner.
He or she then responds with another curt email. There's no emotional connection.
If you can maintain those open and communication links, it will save you thousands.
(24:38):
Tens of thousands of dollars in legal
fees. Fortunately, with a lot of the relationships, that is not an option.
I know. I know that the reality is that, you know, you might have one party
who really wants to communicate and the other one just isn't listening.
That's a sad reality. I hope that the message gets through to some people that
(25:02):
it's far more beneficial,
you know, if you can try to keep the emotions under control and keep the lines of communication open.
It's not easy. It's a difficult process.
Absolutely. So finally, could you share a success story where a well-crafted
(25:22):
financial agreement made a big difference in a client's life?
Yes, I can. It's a little bit unusual in that this particular couple had a house
and they wanted to keep that house together.
And so they would divide up everything else, divide their super,
divide their savings, and they had a house. They wanted to keep it.
(25:45):
Now, usually the lawyers will discourage keeping of an asset,
you know, a significant asset like that, because people get into other relationships,
the new partner gets in the ear of of one party and those ongoing relationships
where you're keeping this property can be jeopardised.
(26:06):
You have that, if that's set out in a binding financial agreement,
it could mean that the agreement fails or somebody tries to challenge it because
they want out of this arrangement now.
In this particular case, we had a couple who wanted to keep this family home,
not for themselves, but for the benefit of their autistic son.
(26:28):
So their son had a severe form of autism and he really required stability.
He needed a stable family home. And so we were able to arrange that the parties
kept the family home for the benefit of their son and work out some arrangements
of how they would deal with this situation and still have a strong binding financial agreement.
(26:53):
That was a pretty good outcome. I was happy with that. That sounds lovely.
That sounds so good. And a wonderful example of, yes, moving those emotions
aside and coordinating their efforts for their son.
Well, there's definite benefits. I can see it from so many different angles.
There are so many benefits to setting up BFAs.
So what we might do is at the bottom of this episode, I'll pop in your email
(27:18):
address, the contact that we have for you, for anyone that listened that would
want to go down this path and work with you to establish that.
Thank you so much, Ian, for sharing your invaluable insights with us today.
Pleasure. Thank you. It's been really good to have you.
Okay. One of the things I didn't really cover, how can single mums protect themselves
(27:40):
and make sure their agreements are fair?
So essentially, the answer to that is that when you receive your legal advice,
it's a requirement that the lawyers advise you whether or not the agreement
is to your advantage or disadvantage.
If it's a separation, for instance, they'll look at that and go,
(28:02):
well, if this came before the court, is it within the scope of what you might
expect that the court would say, yes, that's fair and reasonable,
or is it outside of that scope?
So if you could expect to get a better result going through the court,
then it might be said that the agreement, the terms that you have in that agreement
are to your disadvantage.
And the lawyer should to take that out. And the lawyers are required to explain
(28:27):
to you whether that agreement is to your advantage or to your disadvantage.
And once you've got that information, you can then decide whether or not you
want to proceed with that agreement under those terms or just renegotiate. Fair enough.
Now, that's brilliant. I'm glad that you brought that up. A lot of the times,
mum's stepping into this situation.
(28:47):
Obviously, it's the first time they're there. We don't get divorced every day.
And you are second guessing and trying to figure out the best way forward without
having the information foundation there.
So knowing that the legal eagles are bound to disclose that to you or to advise
you to that effect, that's really helpful to know.
(29:08):
And there's also, they've got to advise you of your rights as well.
Make sure that you understand what rights you have under the law at the moment.
And once you sign that agreement, you're going to give up some rights.
You're going to give up the right to have a court intervene and decide how your
property should be divided.
Because the purpose of a binding financial agreement is to keep you out of court.
(29:31):
Thank you so much, Ian, for sharing your invaluable insights with us today.
Your expertise on binding financial agreements and financial planning has undoubtedly
provided our listeners with the clarity and confidence they need to take control
of the financial future.
It is clear that the right guidance single mums can protect their assets and
build a secure foundation for themselves and children.
(29:51):
For those of you who want to delve deeper into this topic or explore how Ian
can assist you personally, be sure to visit his website.
And for our incredible mums out there, if you haven't already,
join us in the Single Mum Vine, the best Facebook group for single mums,
where you will find support, advice and a community that truly understands your journey.
Lastly, we're excited to announce that our new messaging widget on Beanstalk
(30:15):
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Head over and leave us a voice message with your questions or comments.
We'd love to hear from you and might even feature your questions in an upcoming episode.
Thanks for tuning in. And remember, you're not alone on this journey.
We are here to help you thrive every step of the way. Until next time,
take care and stay empowered.
Welcome to Beanstalk Mums podcast. Here at Beanstalk Mums, we believe that every
mum is a powerhouse of potential and strength.
Our mission is to uplift, empower and support single mums on their incredible journey.
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(00:21):
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Join a vibrant community as we delve into topics that matter to you most.
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(00:44):
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Welcome to Beanstalk Mums, where your story is our inspiration.
(01:07):
Today we have a special guest, Ian McLeod, a renowned public speaker and expert
in financial agreements for couples.
With nearly two decades of experience, Ian has dedicated his career to helping
individuals navigate their financial futures with clarity and confidence,
specialised in the creation of Binding Financial Agreements,
(01:27):
otherwise known as BFAs.
Ian is practical insights and compassionate approach, making him an ideal guest
for our podcast, especially as we dive into the topic of financial empowerment for single mums.
In this episode, Ian will explore the critical role that financial agreements
play in securing a stable and secure future for single mums.
(01:49):
He will discuss how binding financial agreements can help protect your assets,
manage your finances and avoid potential conflict.
This episode is packed with actionable insights and strategies that will empower
you to navigate the challenges of single motherhood with clarity and confidence.
So stay tuned and get ready to enhance your financial security with expert advice.
(02:11):
Welcome, Ian. Thank you for making the time to talk to us today.
It's really good to have you here. To start, can you help us understand what
binding financial agreements are and why are they crucial, especially for mums?
Okay. Well, thanks for having me, first up. This is a new experience for me.
(02:33):
A binding financial agreement is
essentially an umbrella term for a
document or a legal contract that sets out how your assets and liabilities should
be divided in the event of either a breakdown in your relationship or if your
(02:55):
relationship has already failed.
And so in relation to single mums, they'll either be, they'll be at some stage of a relationship.
You know, if they've just come out of a marriage or de facto relationship,
they may be wondering, well, how do I go about dividing up all our stuff?
(03:15):
And the normal thing is people just run off to a lawyer and start racking up the bills.
That's how it normally happens, okay? I try to discourage people from taking
that path or it might be a...
A mum who's, she's been through the mill, they've settled their property after
(03:38):
the relationship and I'm just going to pull out a scenario here, okay?
You know, let's say, let's say she's come out of the relationship,
she's got a house, she might still have a mortgage, she's got a couple of kids
and she's concerned that if she gets into another relationship,
that house, that property, superannuation, whatever, that could be at risk.
(04:02):
And she wants to preserve that for, say, her children.
So in that case, you can use a binding financial agreement to say,
this is my house, this is my stuff, and we're going to be in this relationship.
We hope for the best, but if the relationship fails, I get to keep my house,
I get to keep my superannuation,
(04:23):
whatever, and you get to keep whatever you've brought to the relationship,
which might be real estate or it might be an old land rover and a boat. Who knows?
So just think of a binding financial agreement as something that you can put
in place at the end of a relationship or at the beginning of a relationship or even in the middle.
(04:45):
So before, during or after a marriage or a de facto relationship.
That's really insightful and it actually triggers a memory of a few questions
like that being asked within a mum's community along the lines of I'm entering a new relationship.
What do I do to protect myself? So that is perfect. That's going to really help a lot of mums already.
(05:06):
And so I wonder if a mum is considering a BFA, how would she go about creating one?
What are some of the key things she should be mindful of?
I need you to give me a bit some scenario here, all right? Because if we're
talking about a separation or we're talking about moving into a relationship.
Oh, can we do both? Both? Yes, of course we can.
(05:28):
So let's start with the separation. So say a mum is separating.
How would she go? Okay, right. So the normal, when you're separating from a
partner, you have some choices to make.
If you can agree with how your property should be divided and you can maintain
those lines of communication, hopefully you can come to an arrangement together
(05:51):
that you're both comfortable with.
Now, if you can get that far, you can then either ask the court to issue a court order.
So what you do is you make an application for orders by consent from the court.
So you're actually making an application to the magistrate and saying,
this is how we want to divide our stuff. Do you think that's fair and reasonable?
(06:14):
Now, if the magistrate thinks that what you want to do is fair and reasonable,
they will make a court order and then you have to follow that court order.
Now, that process can be a bit arduous. It can be a bit uncertain and it can
be costly, particularly if you've got lots of lawyers involved.
If you would prefer to handle things on your own, you can make a binding financial agreement.
(06:36):
So in a binding financial agreement, it's just a contract between the parties
that says, there's, all right, we've decided how to divvy up our property pool.
And before you sign that contract, you must receive legal advice.
So, you can't avoid the lawyers altogether, but you can minimise the amount
of time that the lawyers spend on that matter.
(06:59):
Minimising the cost. Yeah. So, you can minimise that cost by preparing the document yourself.
Our thing is we help you do that. And then we put you in touch with some lawyers
who provide the legal advice in relation to that document so it becomes binding.
So unless you get that legal advice, it doesn't have any binding effect.
It's a worthless piece of paper. Can I answer the question?
(07:22):
Yes, you did. Can I just quickly ask, if it's made binding, can the court still
rule against it if the other party, okay, under what circumstances?
Yeah. Generally speaking, when you set up a binding financial financial agreement,
you have to be open and honest with the other party.
The parties themselves can't make a decision, an informed decision,
(07:45):
unless they know exactly what the other party has in their assets and liabilities.
Just like when you go through court, you have to disclose all of your property to the court,
to the magistrate. So, the magistrate can make an informed decision about how
that property pool should be divided.
When it comes to a binding financial agreement, you still have the same rules
(08:09):
except you have a little bit more control over the outcome because the outcome
is dependent upon you, not the court.
So, you still have to make full and frank financial disclosure to each other,
all right, so you can make an informed decision.
And the lawyers also know what is in your property pool so they can provide informed legal advice.
(08:32):
Under what circumstances will the court, for example, overrule that?
Sorry. Yeah. If you are found that one party has deliberately tried to mislead
the other, all right, then the court can overturn that agreement.
If there's evidence of fraud, the court can overturn that agreement.
If there's evidence of duress, coercion, or what we call unconscionable conduct,
(08:57):
the courts can intervene and overturn that agreement.
But if the parties are open and honest with each other and there's no coercion,
there's no duress, then it's very, very difficult to have that agreement set aside.
Okay. Does that make sense? Yes, absolutely. That's really good.
It may come up as a concern for some mums where they'll go to the extent of
(09:19):
setting up VFA and then when things unfortunately do proceed to court,
the judge might go, well, no, because you've got, say, shared custody now.
So when you make a binding financial agreement, it closes the door to the family court.
So once you've signed that document.
Cannot bring an action in the family
(09:40):
court in relation to whatever you've decided to do in that document.
But you can attempt to have that agreement set aside.
You know, it is your right to have an agreement set aside or request that the
courts set the agreement aside or cancel it if there's evidence of duress,
(10:01):
coercion, particularly family violence or anything like that.
If one partner says to the other, either you sign this or you won't see your
children again, well, that's duress.
That's not agreement.
That's not a genuine agreement. And so under circumstances like that,
the courts would definitely set the agreement aside.
(10:22):
But part of the legal advice is when the lawyers provide their legal advice,
they dig into that sort of issue anyway to make sure that there is a genuine meeting of the minds.
There is no duress you know they're acting their own
free will so you hope that you know by engaging the lawyers
they do that due diligence too and and things are
set as they're supposed to be said yeah and look when when people send their
(10:45):
documents back to us or you know i i make that that quite clear that um you've
got you must have genuine agreement if you haven't got genuine agreement i can't
help that that's good to hear and then so to go back to the original question question,
if the mum was setting up a new relationship,
how would that differ in the way she would go about getting a BFA?
(11:09):
The normal process, you run after the lawyer.
Lawyers will listen to what you have to say.
And then they'll say, come back with all your financials, bank details,
statements, your superannuation statements, deeds for your house, if you have so.
And then they'll take that and they'll put it into a document.
You'll come back have another discussion about that
(11:31):
document and if you're happy that it reflects your your
wishes and your needs at that time they'll instruct you
to give a copy to your partner and then your partner has
to go off and seek legal advice once both parties have received legal advice
you can then sign the agreement and it will be binding after the solicitors
have provided a certificate so the solicitor has to provide a certificate that
(11:55):
states they've provided a certain legal advice in relation to that document.
When you've both got a certificate, you can sign that document and it becomes binding.
The way we work is I'm not a lawyer. I'm not even legally trained.
I just happen to be involved in a business where binding financial agreements
have absorbed the information by osmosis.
(12:18):
So I have a relationship with a number of lawyers,
five who are happy to provide the
legal advice in relation to a document that has
been drafted from a kit that we provide so we provide
a kit through our website in relation to separation or
before relationship whatever the case may be and
(12:38):
so you complete that document yourself send
it back to me and my job is then to act as
a conduit between the customer and the
lawyers so I have to then fine-tune that document so the lawyers can work with
it and work with it quickly and efficiently my job is to make the lawyer's job
easy does that make sense yeah absolutely absolutely and of course everyone
(13:02):
knows the less time you spend using a lawyer's time.
Uh it ends up being beneficial for everyone not so much for the lawyers but
uh yeah well that's That's all they can charge for, you know.
It's not like a motor mechanic who, you know, charges for his time and the spare parts.
All the lawyers got, all they have is their time. And they're quite often under
(13:24):
a lot of pressure to make sure that they're charging the appropriate number
of billable hours. So...
The process we have keeps that to a minimum. It's brilliant.
Well, there's definitely a lot to consider when going down that route.
And it does seem that your way is a lot more streamlined and financially viable.
(13:47):
Tell me though, are there any
common misunderstandings or myths that are around financial agreements?
Is there anything that these agreements can't protect you? Yes.
If we were talking about a separation, people will often want to include issues
relating to children in their binding financial agreement.
(14:09):
A BFA is just for dividing your property.
You can't include provisions that relate to the care and welfare of children in a BFA.
So you couldn't put in like child support payments or anything like that into like a guarantee?
No, unfortunately, the child support is governed by the Child Support Assessment
(14:32):
Act, which is a different section of the law.
Financial agreements or binding financial agreements are governed by the Family Law Act.
So different playing fields, provisions that relate to children.
You know, people might want to put in there, who's going to have the children
at Christmas or on Father's Day or whatever the case may be.
(14:52):
Okay if there's a dispute about children
who they should be spending time with all right
can't sort that problem out in a contract or an agreement if you have a dispute
it can only be resolved through the court system unfortunately and and then
things around the children to the time as you've mentioned that tends to be
(15:14):
governed by the parenting orders and our parenting agreements agreements,
the orders being set through the court, as you've mentioned.
So, again, that's just completely around...
The assets or the financial assets that you are stepping in to a relationship
with or wanting to leave the relationship with.
Does that include your super and things like that?
(15:37):
Yeah. Yeah. You can split, you can divide super with a binding financial planner.
Yeah. You can certainly divide super. It requires that very specific provisions
be placed in that document and it has to go off to the trustee of the super
fund before the lawyers would normally get involved,
(15:57):
in our case anyway, under normal circumstances.
You know, if you do this through a law firm, it can be very expensive to split superannuation.
It's only a matter of a few extra paragraphs and getting those paragraphs approved
before you get the legal advice.
Thinking through how to ensure that the mum's financial agreements are both
(16:17):
fair and protective of their assets in a way to include as much as we can in there.
So super being one of those things, obviously future income potentially,
not child support payments, not the upkeep of a child that does not go in.
What other assets could potentially go into that agreement besides say the house and the car?
(16:41):
It's not common, it's not common, but sometimes people include their pets.
Because pets are actually property.
Wow. So sometimes people will say, well, you know, one partner will get the care of… Gosh.
Spot, right? Oh, Lord. I would have thought that's a parenting order.
(17:03):
Well, sometimes people treat their pets like children, but they're actually seen as property.
What else? What else? Yeah, like their share portfolios, real estate, business interests.
Right. You know, you might have your own business.
It falls within the property pool. You know, you might have a family,
(17:26):
you might have a company and a family trust,
which is all in the property pool, but those sorts of things you might want
to say, he's going to keep his control of the family trust for the benefit of
the kids, right, or, you know, the other partner's going to keep control.
It's up to the individuals to decide themselves what is.
(17:47):
Generally, if it's worth more than about $5,000, dollars it's it's considered
something that should be included in the in the property pool.
When we think about the mum that said it's starting up a new relationship down
the track can she potentially safeguard herself for any windfalls so if she
wins the lottery or if her grandmother passes away or any sort of that can also
(18:09):
be included and would that be an extra clause or?
No, in those documents, we define specific terms.
One is separate property and what is joint property.
So just to be clear, we're now talking about an agreement in an ongoing relationship
where we want to set out what's yours and what's mine.
(18:32):
So we define separate property.
Separate property is any property that you already have and own that you've
listed in your assets and liabilities schedule within the document.
But it's also any superannuation interest in your name that you've either accumulated
prior to or after the relationship or after the date of the agreement rather.
(18:57):
Any bank account that's in your name alone.
If it's real estate, you want to buy another investment property if you're in that sort of position.
If it's in your name alone and the mortgage is in your name alone,
then it is your separate property.
If you have a windfall or a redundancy payment from work or an inheritance,
(19:20):
that's all classified as your separate property.
Joint property is anything that you already set out as joint property so that
you have another schedule in the document where you list your joint property,
which might be the a big screen TV and a car or a joint savings account or whatever the case may be.
If you cannot define something as separate property, then it would become joint property.
(19:46):
Does that make sense? Yes, yes, it does. So far? Okay.
And so in the event of separation, you each get to keep your separate property
and you divide equally any joint property.
So you can define just about anything you want as separate property. you like.
So apart from what the things I've already mentioned, you might say any interest
(20:08):
in a company, any interest in a family trust, something that you set up in the future.
And you look and you will often have people who come to us and say,
look, you know, I've got my house.
I want to keep my house, but we want to buy a house together.
We've been, you know, we're sort of heading towards marriage,
but we want to buy a property together, right? So you can then,
(20:31):
Then combine your resources, if you like, and buy that property jointly together.
So an asset that in the event of things go south, you can set out in the agreement
how that new property should be divided.
And it might just be as simple as the house has to be sold and we divide the proceeds equally.
(20:52):
Or it might be a little bit more complex where one partner puts in a bigger
chunk of money to the deposit or something like that.
And then we just have to caress the claws into shape, that extra contribution
is recognised and that extra contribution is paid out in the event of separation.
Does that make sense? Yes, it certainly does. Thank you for clarifying all that.
(21:15):
It's definitely taught me a lot today. Are there any pitfalls that mums should
look out for when negotiating these agreements and how can they avoid them?
The biggest one is not making full and frank financial disclosure.
That's the biggest one. Sometimes people will go, oh, look, do I have to make full disclosure?
(21:35):
Yeah, because I don't really want to tell him about what I've got in the bank
or I don't want to tell him about what's in my super or whatever. And that's a red flag.
If you're thinking, I don't want to tell that person about such and such,
it's probably because they think, well, if they knew that I had this,
they wouldn't want to enter the agreement.
By not disclosing what you have, you create a weakness in the agreement.
(22:01):
You weaken the foundation of that document.
So if it's ever challenged by the court, you may find that it's set aside for
what we call non-disclosure of a material matter. It's a type of fraud.
And so by not disclosing or withholding information that may be pertinent to
the other party's decision about entering that agreement on those terms,
(22:26):
you're setting yourself up for failure.
And that makes absolute sense. It sounds like it would make the whole agreement non-void.
So it almost negates paying all that money to have it put in place in the first place.
So that makes absolute sense. A lot of what you're saying really heavily weighs
on two parties being able to communicate amicably.
(22:49):
Yes. When you're recoupling, there are completely different emotions are running
wild, and those are good emotions, and they don't tend to hinder things,
although they might sort of
cloud someone's judgment as to protective they should be of their assets.
But on the other spectrum, when you are separating, you have a lot of hurt and
(23:09):
a lot of negative emotions.
So you already mentioned that your service is different to the lawyers.
You assist the lawyers to do their job quickly.
Is there a way that you potentially assist in situations where the emotions are high?
So do you support your clients through the emotional side of things while navigating,
(23:30):
these agreements? I try to stay out of it.
It's not my wheelhouse. If people are having emotional difficulties,
communicating with the other side, or there's tensions are running high,
I can't really assist with that.
You know, what they really should do is seek some counselling,
(23:51):
go to mediation, do anything but run off to the lawyers.
Because running off to the lawyers at times like that is just like,
I liken it to going out and hiring a sellsword. it.
You want somebody to go and slay the dragon for you, right?
And they'll do their best to slay the dragon for you, but it will cost and it
(24:14):
escalates the tension, right?
Because it's so easy to hide behind your lawyer who sends a curt email off to your partner.
He or she then responds with another curt email. There's no emotional connection.
If you can maintain those open and communication links, it will save you thousands.
(24:38):
Tens of thousands of dollars in legal
fees. Fortunately, with a lot of the relationships, that is not an option.
I know. I know that the reality is that, you know, you might have one party
who really wants to communicate and the other one just isn't listening.
That's a sad reality. I hope that the message gets through to some people that
(25:02):
it's far more beneficial,
you know, if you can try to keep the emotions under control and keep the lines of communication open.
It's not easy. It's a difficult process.
Absolutely. So finally, could you share a success story where a well-crafted
(25:22):
financial agreement made a big difference in a client's life?
Yes, I can. It's a little bit unusual in that this particular couple had a house
and they wanted to keep that house together.
And so they would divide up everything else, divide their super,
divide their savings, and they had a house. They wanted to keep it.
(25:45):
Now, usually the lawyers will discourage keeping of an asset,
you know, a significant asset like that, because people get into other relationships,
the new partner gets in the ear of of one party and those ongoing relationships
where you're keeping this property can be jeopardised.
(26:06):
You have that, if that's set out in a binding financial agreement,
it could mean that the agreement fails or somebody tries to challenge it because
they want out of this arrangement now.
In this particular case, we had a couple who wanted to keep this family home,
not for themselves, but for the benefit of their autistic son.
(26:28):
So their son had a severe form of autism and he really required stability.
He needed a stable family home. And so we were able to arrange that the parties
kept the family home for the benefit of their son and work out some arrangements
of how they would deal with this situation and still have a strong binding financial agreement.
(26:53):
That was a pretty good outcome. I was happy with that. That sounds lovely.
That sounds so good. And a wonderful example of, yes, moving those emotions
aside and coordinating their efforts for their son.
Well, there's definite benefits. I can see it from so many different angles.
There are so many benefits to setting up BFAs.
So what we might do is at the bottom of this episode, I'll pop in your email
(27:18):
address, the contact that we have for you, for anyone that listened that would
want to go down this path and work with you to establish that.
Thank you so much, Ian, for sharing your invaluable insights with us today.
Pleasure. Thank you. It's been really good to have you.
Okay. One of the things I didn't really cover, how can single mums protect themselves
(27:40):
and make sure their agreements are fair?
So essentially, the answer to that is that when you receive your legal advice,
it's a requirement that the lawyers advise you whether or not the agreement
is to your advantage or disadvantage.
If it's a separation, for instance, they'll look at that and go,
(28:02):
well, if this came before the court, is it within the scope of what you might
expect that the court would say, yes, that's fair and reasonable,
or is it outside of that scope?
So if you could expect to get a better result going through the court,
then it might be said that the agreement, the terms that you have in that agreement
are to your disadvantage.
And the lawyer should to take that out. And the lawyers are required to explain
(28:27):
to you whether that agreement is to your advantage or to your disadvantage.
And once you've got that information, you can then decide whether or not you
want to proceed with that agreement under those terms or just renegotiate. Fair enough.
Now, that's brilliant. I'm glad that you brought that up. A lot of the times,
mum's stepping into this situation.
(28:47):
Obviously, it's the first time they're there. We don't get divorced every day.
And you are second guessing and trying to figure out the best way forward without
having the information foundation there.
So knowing that the legal eagles are bound to disclose that to you or to advise
you to that effect, that's really helpful to know.
(29:08):
And there's also, they've got to advise you of your rights as well.
Make sure that you understand what rights you have under the law at the moment.
And once you sign that agreement, you're going to give up some rights.
You're going to give up the right to have a court intervene and decide how your
property should be divided.
Because the purpose of a binding financial agreement is to keep you out of court.
(29:31):
Thank you so much, Ian, for sharing your invaluable insights with us today.
Your expertise on binding financial agreements and financial planning has undoubtedly
provided our listeners with the clarity and confidence they need to take control
of the financial future.
It is clear that the right guidance single mums can protect their assets and
build a secure foundation for themselves and children.
(29:51):
For those of you who want to delve deeper into this topic or explore how Ian
can assist you personally, be sure to visit his website.
And for our incredible mums out there, if you haven't already,
join us in the Single Mum Vine, the best Facebook group for single mums,
where you will find support, advice and a community that truly understands your journey.
Lastly, we're excited to announce that our new messaging widget on Beanstalk
(30:15):
Mums website is up and running.
Head over and leave us a voice message with your questions or comments.
We'd love to hear from you and might even feature your questions in an upcoming episode.
Thanks for tuning in. And remember, you're not alone on this journey.
We are here to help you thrive every step of the way. Until next time,
take care and stay empowered.
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