Finding love again later in life is one of life’s great second chances. You’ve been burned before; you’re older, wiser, financially established and even as you take those hopeful first steps into a new relationship, you’re determined to keep your independence this time around.

But entering a serious relationship at this stage usually comes with financial history: a home you worked decades to pay off, a healthy nest egg, or an inheritance you plan to leave to your adult children.

When you bring established wealth to a relationship, coupling up is about more than joining two hearts; it’s a joining of assets, as DDCS family lawyer Megan Ho points out.

“Many people don’t realise that marriage is not the only way to have legal obligations with your partner. As a relationship progresses, the law begins to view you and your partner as a single financial unit with mutual rights and obligations,” she says.

“Once you live together for two years, or sooner if you have a child together or make significant joint financial contributions, you are legally considered de facto and could have a claim on each other’s assets.

“Importantly, the court considers everything in the asset pool at the time of assessment, regardless of whether it was acquired before or during the relationship. In other words, your family home or superannuation accumulated over decades could be subject to division.”

In practice, these lines blur quickly. Consider a scenario where one partner moves into the other’s home. If the non-owner partner contributes to repairs, rates or family welfare, a court can factor those contributions into a property adjustment upon separation. This can give the non-owner partner a valid claim to the home’s capital growth, potentially creating a complex legal battle for the original owner.

That is where a binding financial agreement (BFA) comes in.

When drafted properly, a BFA is a tool that deals with how your assets and liabilities will be distributed in the event of a separation.

A BFA is entirely separate from your will or enduring power of attorney. For example, getting married automatically revokes an existing will unless it was made in contemplation of marriage, while simply separating from a partner does not automatically remove them as a beneficiary under your will.

“Always update your will and enduring power of attorney when entering into a BFA,” Megan says.

While colloquially called “prenups” due to their association with marriage, BFAs can actually be entered into before a relationship begins, during it or even post-divorce, and can apply to de facto relationships.

Practically speaking, they are an effective planning tool. Yet, many avoid having the discussion due to negative associations, usually surrounding fears about lack of commitment to the relationship.

Yet it’s quite the contrary.

“A BFA requires a process of mutual trust and respect between the parties,” Megan says.

“Whilst a BFA may not be for everyone, we are seeing more couples consider BFAs due to a number of factors, including increased blended families, people entering relationships later in life, and parties of a relationship having financial help from their parents.

“Without one, a separation may force you down the Family Law Act route, putting your finances in the hands of the court. It can get very messy, extremely expensive and involves far more uncertainty than a BFA.”

A common arrangement for second-time-around couples is to split joint assets equally upon separation while protecting what each person brought into the relationship.

“For people with established asset pools or inheritance, it is wise to quarantine that wealth from the family law process,” Megan says. “If you own property before the relationship that you want to preserve for sentimental reasons or for your adult children, a BFA can prevent a scenario where an ex-partner claims a share or forces a sale.”

Ultimately, a properly drafted BFA eliminates the uncertainty and financial risk that often accompanies a new relationship — but it takes expertise and strict compliance to put the “binding” into the BFA.

Full financial disclosure is mandatory — both parties must lay all assets, liabilities, and financial circumstances on the table. Crucially, for the agreement to be legally binding, each person must obtain independent legal advice on its potential pros and cons, as well as how it affects their legal rights.

“The court can set an agreement aside if legal formalities are not met, if disclosure was flawed, or in cases involving unconscionable conduct or undue influence,” Megan says.

“Family law and estate planning are highly specific to your situation, assets and state. Consulting a professional ensures your interests and your children remain fully protected as you take this next step.”

For more information, visit DDCS.