If you are fancy-free, you can do what you like because nobody is waiting at home — no partner you must answer to, no children, no heavy family duties. Dictionaries often say “no family or responsibilities,” and that is how people use it now. Though actually, the older heart of the word is romantic: fancy here is an old way of saying love or the person you have your eye on, so fancy-free first meant “not caught by love.” You will meet it most in the set phrase footloose and fancy-free, which paints someone unattached and able to go. It sounds a little old-fashioned and cheerful, not like a legal term. It does not mean “free to imagine things.”