Prenuptial agreements are often thought of as only being necessary for the super wealthy or the rich and famous. However, a prenuptial agreement can actually be a great legal tool that allows you to plan for your future.
Whether you’ve been asked to sign a prenup or you’re considering bringing up the topic of prenuptial agreements with your partner, keep reading to learn more about prenups in Australia.
What is a prenuptial agreement?
In the family law system in Australia, a prenuptial agreement is actually a type of Binding Financial Agreement (BFA) that is made between couples before they get married or before they start living together as a de facto couple.
The purpose of the agreement is to outline how assets and property of the people in the relationship will be divided if the relationship were to end in separation or divorce. The aim is to allow the parties to protect their assets and make decisions about their future without the interference of the Court.
Who can enter into a prenuptial agreement?
For a person to be able to enter into a prenuptial agreement they must be a legal adult, at least 18 years of age.
A prenuptial agreement can be between people who are planning on getting married or entering into a de facto relationship. The agreement can be between heterosexual couples as well as same sex couples.
What does a prenup cover?
A prenuptial agreement can cover a wide variety of matters including what will happen to the assets, liabilities, and financial resources of each party of the relationship. The assets, liabilities and financial resources will include those that have been accrued prior to the relationship, as well as those that are acquired during the relationship too.
Some of the assets that may be included in a prenuptial agreement include:
- Money;
- Real estate and property;
- Businesses;
- Inheritances;
- Investments; and
- Superannuation.
The agreement may also cover other information, such as spousal maintenance, who is responsible for finalising debts and liabilities, and the entitlements of children, including both future and current children.
Is a prenuptial agreement actually enforceable?
Prenuptial agreements are covered under section 90B of the Family Law Act 1975 and are generally legally binding as long as the requirements of creating a prenuptial agreement have been met.
What criteria must be met to make a prenup binding?
For a financial agreement to be legally binding it must meet the following legal criteria:
- The agreement must be in writing and signed by both people who are entering into the agreement;
- Each party must be a legal adult;
- Each party must have received independent legal advice where the lawyer will have explained the advantages and disadvantages of the proposed agreement;
- The lawyer of each party must sign a statement that confirms that they have provided advice surrounding the effects of the prenup.
If any of the above criteria hasn’t been met, then the agreement will not be legally binding.
Can a legally binding agreement ever be overturned or cancelled?
Even if the above legal criteria have been met and the agreement is considered to be legally binding, it is possible for the validity of the agreement to be challenged by either spouse or partner which could result in the agreement being set aside.
The Federal Circuit and Family Court of Australia does have the power to set the agreement aside in certain circumstances, including:
Non-Disclosure
For a prenuptial agreement to be valid, both parties to the agreement must disclose their financial position in full. This includes all assets and financial resources.
If an agreement is made without full and frank disclosure the agreement may be seen as having been obtained fraudulently.
If a party to the agreement has tried to hide assets, perhaps because they have significantly more than the other person, this can give the other party a good reason to challenge the prenuptial agreement if separation or divorce does occur.
Material Change
This means that if there has been a significant change to the circumstances of the relationship that the agreement has not taken into consideration, the agreement could be set aside.
One of the most common types of material change is children. If a couple has children, and the prenup does not make any provisions for children, there is a likelihood that the prenuptial agreement will be set aside.
The Agreement is not just and equitable
While the prenuptial agreement has been developed to allow decisions about how assets and property will be divided upon separation or divorce without having to deal with the court system, the agreement must still be fair and equitable.
While provisions may have been made that were thought of as fair at the time the agreement was made, they may not be considered as being fair and just when it comes time to the agreement being effective.
This can be affected by changes such as children, employment, and the health of one of the parties to the agreement.
Duress and Unconscionable conduct
A person cannot be forced into signing a prenup, because down the track, this could result in the validity of the prenuptial agreement being challenged.
Threatening to cancel the wedding unless the prenuptial agreement is signed is an example of duress and unconscionable conduct.
In the case of Thorne vs Kennedy, pressure was placed on the wife to sign a prenuptial agreement by the husband only days before their wedding. This case resulted in the agreement as being found as voidable due to the unconscionable conduct of the husband who had disadvantaged his wife by bringing her to Australia on the promise of marrying her but refusing to marry her unless she signed the agreement. You can learn more about this case here.
What are the benefits of a prenuptial agreements?
A prenuptial agreement can be beneficial to many different people for a wide variety of reasons, including:
1. A prenup can provide certainty and security
It is impossible to predict the future, especially with life’s twists and turns, but a prenuptial agreement can provide some certainty about your future and the future of your spouse if you were to end your relationship.
2. A prenup can save time, money, and stress
While you certainly need to put some time, money, and effort into creating a prenuptial agreement, this doesn’t compare to the potential time, money, and stress that you may need to deal with if your relationship does end and things are not amicable. Without a prenup, you and your former partner will need to agree on how to split your assets and finances, which could be a lengthy process that involves court proceedings.
3. A prenup allows you to have control over your assets
The details of a prenup can be very precise and allow you to make decisions yourself (and with your partner) without the interference of other parties, like the court. Dividing assets and property while in the midst of an emotional time, like a divorce, can make the process even harder.
4. A prenup can allow you to separate business and personal issues
A prenup can help to prevent a separation or divorce impacting a business that one party is involved in. Whether one partner owns the business alone or with other people, being able to determine what happens to the business in the event of a relationship breakdown provides certainty for anyone who is involved with that business.
5. A prenup is a private agreement
The details of the prenup are between the parties to the agreement and their lawyer. This offers a level of privacy that can be lost in the event of a breakup that results in court proceedings to split assets and property.
What are the downsides of prenuptial agreements?
Like everything else, prenuptial agreements do have their cons. Some of these include:
1. A prenup isn’t free
There are costs associated with creating any kind of binding financial agreement in Australia, including prenups. Generally, these costs could be anywhere between $6,000 to $12,000, however, this is dependent on the complexity of the situation.
2. A prenup could be a way for one party to try to exert control over the other
If one party is in a better position financially than the other, it is possible that the prenup could be a way to financially control the other party. While there are provisions in place, such as each party receiving independent legal advice prior to signing the agreement, there is still the possibility of one party feeling like they have no choice other than to sign the agreement.
3. A prenup requires complex planning and preparation
For a prenuptial agreement to have less chance of being overturned or set aside in the future, it needs to make provisions for potentially significant material changes, like the prospect of having children in the future. This can be highly complex to plan for, however, an experienced family lawyer can make this a lot easier.
4. A prenup isn’t romantic
A prenuptial agreement might take the wind out of your sails in the romance department, and instead bring you back to the crashing reality that the relationship may not last. This can be off putting for people and make them feel like you think the relationship is not going to last.
5. A prenup can be difficult to talk about
Similar to not being romantic, a prenup isn’t always easy to talk about. For some people it can bring up issues of trust – it may make them feel like you think they are only with you for your money or vice versa.
Who should get a prenuptial agreement?
While any couple, whether de facto, engaged, or planning on marriage, can enter into a prenuptial agreement, it may not always be necessary. Some of the circumstances a prenuptial agreement might work best in include:
- When one party of the relationship has significant assets, particularly those that are inheritances or family businesses;
- If both parties have significant assets that they have accumulated prior to the relationship and they wish to protect them;
- If the parties have children from previous relationships. A prenuptial agreement can be a way for a party to ensure that their children receive the entitlements that they wish them to have;
- If a party has unique or significant assets that they wish to treat different to their other assets. The agreement could outline how specific assets are to be treated compared to other ones;
- If there are significant liabilities that a party wishes to be protected from. For example, if one party has large liabilities compared to the other, the agreement may ensure that the other party is not burdened by these liabilities in the event of the relationship ending; or
- If one party is likely to receive an inheritance, be awarded damages, or has a family member provide financial assistance during the relationship.
How do I know if I need a prenup?
Determining whether a prenuptial agreement is right for your circumstances is difficult. But it is something that an experienced family lawyer can help you to determine.
They can help you understand your current position and provide you with advice and options to ensure you’re making a decision that is right for your circumstances.
If getting a prenuptial agreement has crossed your mind, then it is also a good idea to raise the topic with your partner. You can discuss it with them, find out their thoughts and do some research together too.
How to talk about prenuptial agreements with your partner
While talking about a prenup with your partner is a great step, it can also be easier said than done – often a prenuptial agreement is a difficult topic for people to broach with their partner. There are many negative connotations surrounding prenuptial agreements.
One of the reasons the topic can be difficult to talk about is because most people do not enter into a relationship, particularly a marriage, thinking that it is going to end someday.
While a prenuptial agreement is talking about what will happen if you split up, it’s important to remember that it’s about if you split up. The terms of the agreement do not come into effect unless the relationship does end.
A great way to think about a prenuptial agreement is to think of it as insurance – like car insurance, for example. No one buys a car thinking that they are going to crash it or damage it, but they buy insurance to protect themselves from the worst-case scenario.
It’s the same for a prenuptial agreement, you’re just insuring yourselves in case the worst does happen.
If you’re planning a wedding, or other elements of your future together, such as discussing having children or even preparing wills, the topic of a prenuptial agreement may be easier to bring up.
We suggest talking to your partner about the possibility of a prenuptial agreement, rather than demanding that you get one. When a couple is planning on spending their lives together, then it’s only natural that you want the best for each other, which a prenuptial agreement can help to ensure that you both are taken care of in the future if things do not work out.
Do you need help with a prenup in Australia?
Whether you’ve got a prenup that you’ve been asked to sign, you want to get one drafted, or you just need some advice about prenups and binding financial agreements, here at Unified Lawyers we can help you.
We will work with you to review your financial circumstances, including identifying your property, the property of your partner, any joint property, as well as liabilities and debts. We will review the value of your assets and their current worth and potential future worth. And we will review your family circumstances, such as children you currently have or could potentially have.
Once we have an idea of your circumstances, we can work with you to understand your wishes in terms of protecting specific property, as well as understand more about your lifestyle, expenses, and future needs.
All of this information can help us to determine what should be included in an agreement – we can then draft the agreement or review an already drafted agreement to ensure it is fair and in your best interest.
Discuss your future with our experienced family lawyers today.
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