The situation
A Queensland family had invested significantly in a business operated by their adult child and their child’s partner. The investment was made through a private loan, conditional on specific terms. When the family was approached for further funding to expand the business, they set a condition: their adult child needed a Binding Financial Agreement in place before the additional funds were released.
The reasoning was straightforward. The business was growing. Its value was material. If the relationship ended without any legal agreement in place, the business, and the parental investment, could be drawn into a contested property division under the Family Law Act.
The Agreement
Both parties engaged separate family lawyers and received independent legal advice. The Binding Financial Agreement was drafted to record how the business interest and associated assets would be treated if the relationship ended.
The Agreement was signed before the funding was finalised. It was not a prediction that the relationship would fail. It was a condition of the transaction, the same kind of condition a commercial lender might apply.
Total legal cost: approximately $20,000 (for drafting and executing the Agreement and for obtaining independent legal advice for one of the parties).
The outcome
Several years later, the relationship ended.
The Binding Financial Agreement held. The business remained intact. The parental investment was not drawn into the property settlement. The matter was resolved without Court proceedings.
The Agreement did not prevent the separation. It prevented the separation from destroying what the family had built.
What this means for your clients
So if you have clients who have built an empire or business to provide for their adult children, then it would be prudent to safe guard their hard earned efforts from something outside of their control. Whilst an awkward conversation to have, it’s not a prediction that the relationship will fail, it’s an insurance policy. The cost is a fraction of what contested proceedings cost later.
When a client’s financial position makes a Binding Financial Agreement relevant, a referral to a family lawyer is the next step. We work with referral partners to ensure the financial and legal advice align. The Accountant or Advisor remains the primary relationship.
Working with us
When you refer a client:
- Your client contacts us on 07 5390 1400 or at family@gplaw.com.au and mentions your name.
- We book a confidential first consultation, usually within the week.
- We confirm back to you, with your client’s permission, that the conversation has happened.
There is no cost for the first conversation if the client decides not to proceed. There are no surprises.
