Binding Financial Agreements for late-life repartnering: protecting retirement assets and children's inheritance

A growing number of Australian retirees repartner later in life — remarrying or starting a de facto relationship in their 60s, 70s and beyond, often after a divorce or the death of a previous spouse. Late-life repartnering brings real companionship and a new chapter, but it also creates a financial-planning tension younger couples rarely face. Each partner typically arrives with substantial accumulated wealth — superannuation, the family home, investments — and often with adult children from a previous relationship who are the intended ultimate beneficiaries of that wealth. Without planning, a later relationship breakdown can see the family-law system divide the combined pool in ways that transfer one partner's pre-relationship wealth to the other, defeating the retiree's intention to preserve it for their own children. A Binding Financial Agreement (BFA) under the Family Law Act 1975 is the principal tool that addresses this — partners agree, in advance, how their assets will be dealt with if the relationship breaks down.

The late-life tension is structurally different from the planning of younger couples. Younger couples typically start with little and build together; the family-law system's default division broadly reflects their joint contribution. Late-life couples are different: each arrives with decades of separately accumulated wealth, and the relationship is unlikely to involve the same scale of joint wealth-building. If the relationship breaks down after a few years, a discretionary court division could transfer significant pre-relationship wealth from one partner to the other — wealth the retiree had intended for their children from the earlier relationship. For many repartnering retirees the wealth at risk is a lifetime of accumulation, and the stakes for the intended inheritance are high.

A BFA is a written agreement between partners — married, under Part VIIIA of the Family Law Act, or de facto, under Part VIIIAB — setting out how their property and financial resources will be dealt with if the relationship breaks down. It can be made before the marriage or cohabitation, during the relationship, or after separation. Its key legal effect is that a valid BFA ousts the family court's discretionary property jurisdiction for the matters it covers — the partners are bound by their own agreement rather than subject to a court division. For late-life couples that means the BFA can quarantine each partner's pre-relationship assets as their separate property, specify what happens to the family home, address jointly acquired assets, and document the arrangement so each partner's wealth can flow to their own children.

The validity requirements are strict, and they are the most common reason BFAs fail. The technical requirements live in section 90G for married-couple agreements and section 90UJ for de facto agreements — each party must receive independent legal advice from an Australian lawyer about the effect of the agreement on their rights and the advantages and disadvantages of making it, and each lawyer must provide a signed statement to that effect. The agreement must be in writing and signed by both. Full and frank disclosure of assets is essential; material non-disclosure is a ground for the court to set the agreement aside under section 90K (married) or section 90UM (de facto), along with fraud, duress, undue influence, unconscionable conduct, impracticability, and material changes that would cause hardship to a child of the relationship. The practical implication is unforgiving: a BFA must be done properly — both partners with their own experienced family-law solicitors, full disclosure, no rushing, no pressure — or it may not hold up when it matters.

Two further mechanics matter for de facto couples in particular. The court's property jurisdiction for a de facto relationship generally requires a two-year cohabitation threshold (or there is a child of the relationship, or one partner made substantial contributions and a non-order would be unjust). So a BFA done early — even within the first two years — pre-empts that exposure. And the same two Parts (VIIIA and VIIIAB) cover same-sex couples and registered relationships the same way.

The interaction with estate planning is the single most important conceptual point for repartnering retirees, and it is widely misunderstood. A BFA governs what happens if the relationship breaks down while both partners are alive. It does not govern what happens on death — that is the domain of wills, testamentary trusts and superannuation death benefit nominations. And critically, a BFA does not directly prevent a surviving partner from making a family provision claim against the deceased's estate: under state succession law a surviving spouse or de facto partner has standing to claim against the estate even if the will leaves everything to the children. The BFA and the financial arrangements it documents can be relevant evidence in a family provision claim, but they do not bar the claim. For late-life couples that means they need both a BFA and coordinated estate planning: the BFA quarantines wealth on relationship breakdown, while the wills, testamentary trusts and super nominations direct wealth on death. Together they aim to preserve each partner's wealth for their own children; one without the other leaves a gap. (The CGT side of a later relationship breakdown — internal transfers under a BFA or court order — is dealt with separately by the relationship-breakdown CGT rollover.)

The Centrelink reality is that a BFA does not change how the Age Pension is assessed. Centrelink decides whether two people are a "member of a couple" on the facts of the relationship — not on whether they have signed any legal document — having regard to five factors: their financial arrangements (joint accounts, debts, mutual support); the physical set-up of the household (shared quarters, who does which domestic tasks); how they present themselves and are viewed socially; whether there is a sexual relationship; and the nature of the emotional commitment and support between them. No factor is conclusive by itself and not all need be present. Once two people are members of a couple, Centrelink pools their assets and income for the couple assessment regardless of what the BFA says — so the BFA protects against family-law division but does nothing for the "couple cliff", the structural feature whereby two singles each on the full single Age Pension receive more combined than a couple does on the couple rate.

What do worked planning examples show?

These two cases show how BFAs apply in late-life repartnering. Illustrative only — not personal advice — using FY25-26 figures.

Case 1 — Robert, 68, widowed, and Jennifer, 65, divorced, planning to marry. Robert owns a $1.2M home (mortgage-free) and has $800,000 in super, with two adult children from his marriage. Jennifer owns a $700,000 apartment and has $400,000 in super, with one adult child. They plan to live in Robert's home and rent Jennifer's apartment out. On these facts a BFA is the sensible step before the marriage. It can quarantine Robert's home as his separate property — protected for his children — and grant Jennifer a defined right of occupation if Robert dies or the relationship ends; quarantine Jennifer's apartment as her separate property for her child; quarantine each partner's super; and set out how anything jointly acquired during the marriage is treated. Coordinated estate planning has Robert's will leave the home to his children subject to Jennifer's documented occupation right, Jennifer's will leave her apartment to her child, and the super nominations follow accordingly. On the Centrelink side, marriage will trigger a couple assessment regardless of the BFA, and the couple-cliff impact on any Age Pension entitlement should be modelled separately. The rational sequence is to engage independent and experienced family-law solicitors for each partner, make full disclosure, execute the BFA before the marriage, and coordinate with the estate-planning lawyer.

Case 2 — Margaret, 72, and David, 74, both widowed, in a de facto relationship for 18 months and living together in Margaret's home. Margaret's adult children are worried David will end up with a share of their mother's home. Margaret has $1.5M in assets including the home; David has $300,000 in super and lives largely off the Age Pension. On these facts the standard two-year de facto threshold for court property orders has not yet been reached, but the substantial-contribution exception could still bring a claim within reach, so a BFA should be put in place promptly — not delayed. It would quarantine Margaret's home and assets as her separate property (addressing her children's concern directly) and could grant David a right of occupation for a defined period if Margaret dies, balancing protection of her wealth for her children with reasonable provision for him. Coordinated estate planning leaves Margaret's estate to her children with the BFA-documented occupation right for David, which helps — though does not eliminate — the risk of a family provision claim if Margaret were to die first. On Centrelink, given 18 months of cohabitation it is likely the couple assessment already applies; that follows from the five-factor test and the BFA can't change it. The rational steps are prompt BFA execution, coordinated estate planning addressing the family-provision exposure, and clear communication with Margaret's children about what the documents actually achieve.

For retirees considering repartnering later in life, the Binding Financial Agreement is an essential planning tool — but it has to be understood for what it does and doesn't do. The advice work is to raise it early (before the relationship is formalised), refer both partners to independent and experienced family-law solicitors, coordinate the BFA with comprehensive estate planning (wills, testamentary trusts, super nominations) because the BFA handles relationship breakdown while estate planning handles death, model the Centrelink couple-assessment impact (which the BFA does not change), and review the arrangements as circumstances evolve. Late-life repartnering should be able to proceed without either partner risking the wealth they have accumulated for their children — and, with proper planning, it can.

Sources

• fcfcoa.gov.au — Financial agreements
• fcfcoa.gov.au — Agree
• Services Australia — Updating your relationship status
• DSS Social Security Guide
• DSS Social Security Guide