If you’re getting married in Australia this year, it may be worth considering a prenuptial agreement, also known here as a binding financial agreement. The same is true for entering a de facto relationship.
While there are some negative associations with these binding financial agreements, there are plenty of good reasons to seriously consider them.
This agreement can provide some much-needed clarity and transparency for your relationship.
Suppose you want to safeguard your assets, for, in the unfortunate event, your relationship breaks down. In that case, a prenuptial agreement is a way to do it.
So, in this article, we’ll provide answers to the most common questions about prenups in Australia.
A prenup in Australia is a binding financial agreement or prenuptial agreement made between couples that are getting married or entering into de facto relationships.
Typically, these agreements specify which financial assets will be divided in case of a separation.
This can avoid a family court's involvement and stop the Family Law Act 1975 from influencing the division of financial assets. We see prenups most commonly with influential and wealthy couples.
These may have considerable personal assets to their name, and therefore much to lose in a divorce.
Binding financial agreements can cover:
A couple can enter a similar agreement during any stage of the marriage or relationship.
Laws differ for each country, and prenups are no exception. Australian law will apply if you get married and agree on your Prenup in Australia. The agreement needs signing by both people entering into the prenup.
Each must be advised independently and be represented by a different prenup lawyer. This ensures both parties receive advice about the advantages and disadvantages of entering the agreement and how it will affect them.
The lawyers will also sign the prenup to certify that this advice has been given.
For this binding financial agreement to take effect after divorce, you must apply to the Family Law Courts within one year from the date your divorce has taken effect.
Prenuptial agreements are binding financial agreements and stand up in court so long as certain conditions are met. These include the signatures mentioned above that certify how an agreement will affect each person.
It also assumes advice has been provided relatively and that the agreement was considered fair to both parties.
Spouses can challenge this legally binding agreement. The family Law Courts may also dismiss an agreement under section 90K of the Commonwealth’s Family Law Act.
While parties with significant assets benefit from prenuptial agreements most obviously, they are not the only ones who might find a prenup advantageous.
A prenup may also be a wise choice if you're entering into your second marriage and wish to protect your personal assets for the sake of your children.
A prenup may also cover only one particular asset that you or your partner wish to manage in a specific way. It does not have to span the whole pool of your financial assets.
Instead of looking at a prenuptial agreement as a sign of lacking faith, it should be considered an exit plan in the worst-case scenario.
Like home insurance, it protects you and your assets against an unlikely eventuality. It can relieve a lot of the stress that would arise on such an occasion.
Here are some of the benefits that might make a binding financial agreement attractive when entering a new marriage. All of these benefits only come into effect in the unlikely case of a separation.
A Prenup provides certainty. It can lay any concerns regarding financial assets to rest and clarify what may happen in case of separation. This makes it easier to plan for the future in any scenario.
Prenups are private. They're discussed only with you and your partner’s lawyers. Unlike court proceedings, this won’t drag family and friends into your matters as witnesses.
Prenups can save the terrible emotional hassle and the cost of dividing assets in court. It can ensure a much cleaner divorce that treats both parties respectfully and without added injury.
Prenups provide more control over your assets than family court. You can't negate prenups or alter them in family courts. That way, you can ensure the prenuptial agreement handles everything itself.
Lastly, you can effectively protect assets that are personal to you or should be for the benefit of your family and children.
There are disadvantages to Prenups to consider as well.
Since prenups exclude the family law act from influencing any disputes, it can be a tall ask to enter into a binding financial agreement. This essentially takes away any negotiation power years down the line.
Prenups often benefit one partner more than the other if there is an inequality of financial assets to protect.
Couples need to carefully consider what assets they will require together in the future and how this prenup might affect future dependents, like children.
For a binding agreement to take effect, two independent prenup lawyers are required. This makes a prenup costly insurance. However, the price of this still doesn’t compare to the expense of family court proceedings.
These binding financial agreements or prenups can act as insurance during the worst-case scenario. Discuss this with your partner to decide whether you could benefit from an exit plan that protects both your assets and dependents.
Koolik and Associates are Family Lawyers that can consult you on Family Law and the advantages and disadvantages of a prenup in your
situation. Get in touch today. Virtual consultations are also available.
Please note the contents of this post is information only and not legal advice.
If you require legal advice it is best to contact one of our lawyers who can review your particular circumstances and then provide tailored advice according to your needs.