Protecting Inheritance with a Binding Financial Agreement in Queensland

If you receive an inheritance during a marriage or de facto relationship, it may be treated as part of the property pool in a separation or divorce. A binding financial agreement (BFA) is one way to protect those assets and preserve family wealth. Under Australian family law, a BFA sets out how assets may be divided in the event of separation.

Speak with Queensland Family Law Practice for expert legal advice.

What is a Binding Financial Agreement?

A BFA is a contract under the *Family Law Act 1975* that sets out how assets are divided if a relationship ends. Often referred to as a prenuptial agreement, a BFA can be made before, during, or after a marriage or de facto relationship. A properly drafted agreement may cover current assets, superannuation, and inheritances expected in the future. The agreement must meet strict requirements to be legally binding and enforceable in the Family Court of Australia.

Definition

• BFA: A written contract under the *Family Law Act 1975*.
• Purpose: To decide property and financial matters if the relationship ends.
• Timing: Can be entered into before or after marriage or cohabitation.

Example

A couple signs a BFA that specifies an inheritance received by one party remains outside the joint asset pool, even if they later separate.

How a Binding Financial Agreement Protects Inheritance

A BFA can exclude inherited assets from the property pool, ensuring they remain with the beneficiary. Without an agreement, inheritance may be considered an asset in the event of separation. The family court looks at contributions, future needs, and fairness when dividing property. By entering into a binding financial agreement, one or both parties can agree that inherited property, money, or trust distributions are not subject to division of assets.

Ways a BFA Can Protect Inheritance

• Excludes substantial inheritance from the joint assets.
• Clarifies how inherited property is treated in the event of separation.
• Protects family assets intended for future beneficiaries.
• Provides certainty for financial planning and estate plan alignment.

Example

One party inherits a family home. A BFA can state the home is to remain in that person’s name and excluded from property settlement.

Common Questions

Legal Requirements for a Valid BFA

Each party must receive independent legal advice, disclose assets fully, and sign a properly drafted document. Australian family law requires that both parties receive independent legal advice from separate lawyers. The advice must explain the effect of the agreement and its advantages and disadvantages. Full and frank financial disclosure of current assets and liabilities is required, and the document must be signed and witnessed properly.

Key Requirements

• Agreement must be in writing and signed by both parties.
• Each party must receive independent legal advice.
• Solicitors must provide signed certificates of advice.
• Full disclosure of current assets and financial resources.

Example

If one party hides assets or pressures the other into signing, the family court may set aside the agreement, leaving the inheritance exposed to division.

Estate Planning and Inherited Assets

Wills, trusts, and estate planning should be aligned with any financial agreement for lasting protection. An estate plan can direct inheritance through a will or testamentary trust, but without a BFA, the inheritance may still be treated in the event of a relationship breakdown. Coordination between estate planning and family law ensures the protection of assets across both scenarios.

Estate Planning Priorities

• Update wills and testamentary documents when a BFA is signed.
• Review superannuation beneficiary nominations.
• Ensure trusts and financial planning structures are consistent.

Example

Parents leave money to their child under a will. A BFA ensures the inheritance is preserved if the child’s de facto relationship ends.

Advantages and Disadvantages of Using a BFA

BFAs offer flexibility and protection but carry risks if poorly drafted or requirements are unmet.

Advantages

• Protects inheritance and family wealth.
• Avoids property disputes in the Family Court.
• Offers privacy and certainty for couples.
• Can be tailored to specific financial circumstances.

Disadvantages

• Can be costly to draft and finalise.
• May be set aside if legal requirements are not met.
• Does not replace the need for ongoing estate planning.
• May be challenged if financial positions change drastically.

Example

A BFA excluding inherited assets works well until one party’s financial circumstances shift significantly, leading to claims of unfairness.

Common Issues When Inheritance and BFAs Overlap

Poor disclosure, pressure, or changes in financial circumstances can make an agreement unenforceable. Courts may intervene if an agreement appears unfair at the time of signing or if one party did not receive proper advice. Events such as the birth of children, loss of employment, or receipt of significant assets may also create grounds for review.

Typical Risks

• One party fails to disclose assets.
• Agreement is signed without genuine consent.
• Financial disclosure is incomplete.
• Agreement does not anticipate future changes.

Example

A court may set aside a BFA if a substantial inheritance was not disclosed at the time of signing, undermining fairness.

How the Family Court Treats Inherited Assets

Inheritance may be considered part of the asset pool unless excluded by a valid BFA. The Family Court of Australia and Federal Circuit and Family Court assess the contributions of each party, including financial and non-financial contributions. Without a BFA, inherited money or property can be included in the pool of assets and divided to achieve a just and equitable outcome.

Court Considerations

• Timing of when the inheritance was received.
• How inheritance was used in the relationship.
• Whether it was kept separate or mixed with joint assets.

Example

If an inherited property was sold to fund a family home, the court may treat it as part of the joint asset pool.

When This May Not Be the Right Fit

Simple estates or situations without significant assets may not justify the cost and complexity of a BFA. If neither party expects to receive significant assets or inheritance, a formal agreement may be unnecessary. Where there is full trust and equal financial contributions, less formal arrangements may suffice. But if future wealth transfer is expected, a BFA is worth considering.

Indicators a BFA May Not Be Suitable

• No inheritance or substantial assets involved.
• Both parties prefer informal arrangements.
• Relationship is short-term with limited financial ties.

Example

A young couple with modest joint assets and no inheritance expectations may not need a BFA.

How to Judge If You Need This Now or Later

Consider a BFA if expecting a substantial inheritance, entering a second marriage, or holding significant family wealth. Delaying may risk assets being included in the joint pool if the relationship ends. If you have already received an inheritance, act promptly to formalise protection. If you are about to receive a gift, planning ahead is a way to protect your assets.

When to Act

• Before marriage or cohabitation if inheritance is expected.
• Immediately after receiving a significant inheritance.
• When updating your estate plan or will.

Example

Parents advise their child to sign a BFA before marriage to keep a future inheritance within the family line.

Next Steps with Queensland Family Law Practice

Tailored legal advice ensures your agreement is enforceable and protects your rights. Entering into a binding financial agreement requires careful drafting, independent legal advice, and attention to disclosure. An experienced solicitor at Queensland Family Law Practice can prepare documents that reflect your financial position and safeguard inheritance against future disputes.

Next Steps

• Consult a family lawyer for initial advice.
• Provide full disclosure of assets and liabilities.
• Draft an agreement tailored to your circumstances.
• Align the BFA with your estate plan.

Example

You instruct Queensland Family Law Practice to draft a BFA that excludes an inherited property, updates your estate plan, and secures asset protection in the event of separation.