What Is a Prenup And Do They Exist in Australian Law?
No one enters into a marriage or partnership expecting it to fail. However, no one buys health or home insurance expecting to fall ill or experience a break in either, yet most people do the latter without question.
Creating a prenup, or binding financial agreement, as they are referred to in Australian law, can help you outline clear expectations with your partner about the division of assets.
What Is a Prenup?
A prenuptial, or binding financial agreement is a legally binding document under the Family Law Act 1975 that protects the pre-marital or pre-relationship assets of each party in the partnership.
A prenuptial agreement is a legal log of all assets and liabilities held by each party prior to entering the relationship. It then outlines how these assets may be divided in the event of separation or divorce. To make the agreement legally binding it must satisfy the following criteria;
- Each party is to fully disclose their financial position including assets and debts;
- The agreement must be put in writing;
- Each party must have independent legal counsel prior to signing the agreement;
- Each party must sign the agreement willingly.
Do Prenups Exist in Australia?
Yes, prenups exist under Australian law, and are called binding financial agreements. They can apply to both married and de facto relationships, and essentially exclude the Family Law Act from having any say in the decision of how to divide assets and liabilities in the event of a relationship breakdown. Contact us to discuss your options if you are considering a prenup for your marriage or de facto relationship.
Who Can Get a Prenup?
While prenups are usually associated with marriage, they can also be created for de facto relationships, and apply to both heterosexual and same-sex couples. In other words, anyone can enter a binding financial agreement, provided both parties willingly agree to and sign the agreement.
It’s also important to know that a couple can enter into a binding financial agreement at any stage of their relationship, including before getting married or entering a de facto relationship, during the relationship, and even after the relationship has ended, which is called a financial separation agreement.
Prenuptial Agreements Requirements
In order to make a prenuptial agreement legally binding, there are a number of requirements that must be satisfied. These include;
- Both you and your partner must receive independent legal advice from separate lawyers prior to signing the agreement. This advice must outline your specific rights as well as advantages and disadvantages of signing the agreement;
- The agreement must be signed by both you and your partner in the presence of each of your lawyers;
- The legal advice given to each party must come from a solicitor who is currently admitted to legal practice in Australia; and
- Each respective lawyer must provide a signed statement to their client (each party, ie. you and your partner) confirming that you each received independent legal advice.
It’s important to know that if these criteria are not met, your prenuptial agreement may not be binding and may be open to being void or challenged. You can read more about this in the section below ‘Are prenuptial agreements always binding?’.
What Do Prenups Cover?
A prenuptial agreement can cover all financial aspects of each individual in the relationship as well as shared assets and liabilities.
It can outline the separate assets, liabilities and financial resources of each party obtained or accrued before you entered the relationship. This could include property owned, debts owed, and superannuation accrued. It can also cover financial assets and debts acquired during the relationship, such as the family home or investment property, mortgages, car or personal loans. Finally, it can also govern if any and what amount of spousal maintenance must be paid to one party or another.
Advantages of Signing a Prenup
Divorce and separation can be bitter and emotional, making decisions surrounding the division of assets more difficult than it needs to be. Creating and agreeing to a prenuptial agreement before entering into marriage, or at the start of a de facto relationship, allows both parties to agree amicably on how they might divide any assets should the relationship fail. While these agreements are not always binding, it provides a legal basis from which to begin resolving property and financial disputes. A binding financial agreement essentially takes the guesswork out of divorce and separation proceedings by clearly stating who is entitled to what. It can also save you a lot of time and money, as if both parties disagree on who is entitled to what, the legal process can be drawn out and incur greater fees, or even court proceedings.
Some reasons you should consider entering a binding financial agreement:
- A prenup allows you to protect your valuable assets, which is especially important when there is a significant difference in income or ownership of personal assets;
- The agreement is not set in stone. You and your partner can agree to change or cancel an agreement at any time;
- The agreement can save significant time and money, with the division of assets finalised quickly in the event of separation or divorce;
Disadvantages of Signing a Prenup
In a relationship where one party earns significantly more than the other, or one party does not work (a stay at home parent for example), it’s important to ensure that the prenuptial agreement outlines the value of what the non-working partner brings to the relationship or family. The time spent caring for children, for example, is a significant contribution that needs to be included when considering the division of assets or the payment of spousal maintenance in a prenuptial agreement. If an agreement does not take this into consideration, you may find yourself in a disadvantaged situation where you do not receive what you believe you may be entitled to. This is why it is imperative to seek the advice of an experienced family lawyer to help you understand what you may need to have included in the agreement.
What Do I Need to Consider Before Entering a Prenuptial Agreement?
There are a number of things to consider before committing to a prenup. Firstly, you need to consider how you are planning for the future. It’s important to remember that if a relationship never breaks down, a prenup never gets enforced. By entering into a binding financial agreement, you and your partner are preparing for the worst-case scenario, without the emotion or stress of having to do it during a breakup.
It’s especially important to seek legal advice to discuss your situation, because, if completed correctly, these agreements essentially prevent the court from stepping in to divide your assets. You may love your partner and believe they would never do anything to hurt you, however, if a separation or divorce turns sour, you want to make sure you know your rights and your assets are protected.
How To Arrange a Prenuptial Agreement
In order to make a prenuptial agreement legally binding, it must adhere to strict technical requirements, and therefore should be prepared by an experienced family lawyer. Contact us for an obligation-free consultation with an experienced lawyer to find out how we can prepare an agreement that suits you and your partner.
How Much Does a Prenuptial Agreement Cost?
There is no fixed price for filing a binding financial agreement in Australia, as it is something prepared by a lawyer, reviewed by a second, independent lawyer. Contact us for an obligation-free consultation, and we can help you to understand your situation and whether or not a prenup is right for you.
Are Prenuptial Agreements Always Binding?
It’s important to understand that prenuptial agreements are not set in stone. There are a number of reasons a prenuptial agreement may be voided, so it’s important to seek the advice of an experienced family lawyer to understand the risk of this in your situation and how this may be avoided. Some reasons an agreement may be immediately voided include;
- The agreement is found to be fraudulent (which could happen if you or your partner intentionally fail to disclose financial information);
- Legal or technical requirements are not met such as independent legal advice not received by one or both parties;
- You or your partner were pressured into signing the agreement;
- The agreement cannot be practically fulfilled.
How are Prenups Enforced?
Due to the nature of a prenuptial agreement being a legally binding document, it essentially removes the Family Court from having a say in the division of your assets. If you wish to dispute the agreement, you will need to seek legal counsel and the matter will be taken to court, however, this does not guarantee it will be heard, let alone successful.