Whilst we hear a lot about Prenups being signed by the wealthy and famous, they are not just an agreement for celebrities. In fact, any couple in Australia considering living together or getting married can enter into a prenuptial agreement.
In this article we explore what a prenuptial agreement is, when you can get one, when they can be changed and the instances when a Prenup may not stand up in Court.
What is a Prenuptial Agreement?
Under Australian law, a pre-nuptial agreement is a type of Binding Financial Agreement, otherwise known as a BFA.
Whilst this may not be the first thing you consider when thinking about marrying your partner or even living with your partner, a BFA can help to set expectations in the event your relationship was to break down.
A BFA is a legally binding contract between you and your partner, where you plan to live together (or are already living together) in a de facto relationship or as a married couple.
A BFA will usually set out what happens to your finances if you separate or divorce. For example, a BFA might cover any money you have, property and investments as well as superannuation. A Prenup may also set out who is to pay for any joint liabilities or debts. Prenups can even go as far as setting out what will happen in the future, such as what happens if you and your partner have children and how that will affect your finances.
Can you get a Prenup after you get married?
A BFA can be entered into not only before marriage or before you commence a de facto relationship but can also be entered into during the marriage or de facto relationship or after your relationship has ended. A divorced couple can also enter into a BFA, which can be beneficial if they have missed the 12-month time limit for applying for a property settlement with the Court following their divorce.
Can a Prenup be changed after marriage?
A Prenup can be changed at any time after it has been entered into, including after marriage, but only by entering into a further BFA or, if you wish to end the agreement and not replace it, by entering into a Termination Agreement.
Should I enter into a Prenup / BFA?
It is always a good idea to discuss your financial future with your partner, including what is to happen if your relationship were to end. Formalising any arrangements you come to with a BFA can provide you with peace of mind and certainty. It also offers a private way to deal with your joint property in the event of separation, keeping you both out of the Court system.
There are certain circumstances in which a BFA is highly recommended, including:
- If you have children from a previous relationship, a BFA can be used to protect the future inheritances of your children.
- Where you or your partner bring significant assets to the table, it can be sensible to protect the wealth that is brought to the relationship.
A valid BFA is binding for both you and your partner in the event of separation or divorce.
Disadvantages of Prenuptial Agreements
There are downsides to entering into a BFA, particularly if you are a person in a weaker financial position. A property settlement made by the Court is required to be ‘just and equitable’, whereas a BFA does not have this requirement entrenched. Financial needs can change which may require amendments to the BFA. Prenups are not easy to amend as they require a further BFA. Likewise, it can be difficult to terminate a Prenup.
Do Prenups stand up in Court?
The Family Court has the power to set aside your BFA in prescribed circumstances, including:
- If something important was not disclosed prior to signing;
- If the BFA was entered into to defraud a creditor (such as a bank);
- If the BFA does not comply with the provisions of the Family Law Act, for example, if the agreement was not signed properly or legal advice was not obtained;
- If there has been unconscionable behaviour on the part of one of the parties in the lead up to the agreement; or
- If there has been a material change in circumstances in relation to children and the children or the party with the care of the children will suffer hardship if the BFA is not set aside.
If the Court has set aside your BFA, it also has the power to make Orders that it considers ‘just and equitable’ to preserve or adjust the rights of you or your partner.
What about a Do It Yourself Prenup?
A BFA will only be binding if it is written in accordance with the Family Law Act. In particular, both you and your partner will need to receive independent legal advice from a lawyer about the impact of the BFA, and about any advantages and disadvantages of the agreement. Your lawyer will need to provide you with advice and a statement
confirming they have provided you with advice, and a separate lawyer must do the same for your partner. The BFA will need to be signed by you and your partner, as well as your respective lawyers. There are also a number of other requirements to make a valid and legally enforceable BFA.
To ensure that you fully understand the advantages and disadvantages of a BFA, we recommend you seek expert family law advice. This will also ensure that you have a robust agreement that is less likely to be challenged in Court. DDCS Lawyers can provide you with the necessary expert family law advice in relation to your Prenup.
DDCS Lawyers specialise in all aspects of family law and can help guide you through the difficult process of separation. If you need assistance, contact our team on (02) 6212 7600 to book a consultation.