September 13, 2016 by Clewett
In Australia, prenuptial agreements (also known as a ‘prenup’ or a Binding Financial Agreement) can be entered into by parties who are intending to marry or intending to enter into a de-facto relationship. They can also be entered into after a de-facto relationship has commenced.
Not all relationships last. Prenuptial agreements set out how your property will be divided if your relationship breaks down. With a prenup your assets and liabilities will be divided according to the terms of the agreement and prevents the Family Court from becoming involved if your relationship does not work out.
If your relationship was to end, having a prenuptial agreement could save you the stress of working out who gets what in the post separation period.
When are Prenups most appropriate?
Generally speaking, in those cases where:
- One person has much more property than the other when the relationship begins;
- One person is, or may later become, entitled to an inheritance or gift;
- You are moving into a second or subsequent relationship where children from former relationships might need to be protected financially, or
- You both simply want to make sure the terms of any property division are agreed up front and will not end up the subject of protracted and invariably costly litigation.
Are Prenuptial Agreements Binding?
These agreements are not binding unless the formal requirements under the Australian Family Law Act are met.
The Agreement will only be binding if the following requirements are satisfied:
- The agreement is signed by all parties;
- Before signing the agreement, each party was provided with independent legal advice about the effect of the agreement on the rights of that party and about the advantages and disadvantages to the party making the agreement;
- Before signing the agreement, each party was provided with a signed statement by his or her respective lawyer certifying that the advice referred to above was provided to that party;
- A copy of the statement referred to in 3 above was provided to the other party;
- The agreement has not been terminated and/or has not been set aside by a Court.
Couples may choose to enter into an informal agreement (which can be written or verbal), but any such agreement is not legally binding (enforceable) by a Court.
Such agreements can however be taken into account by a Court if a judicial determination is required to be made.
Can you cancel or change an agreement?
In certain circumstances, either party has the right to challenge a legally binding agreement.
Couples can agree to vary the terms of – or even terminate – an agreement. If your partner does not agree, you must prove:
- There was a fraud (dishonesty) including non-disclosure of a material matter at the time the Agreement was made;
- The agreement is not practical to carry out (not merely inconvenient);
- The other person has acted in an unethical or unfair way. (For example, a party has entered into the agreement for the purposes of attempting to defraud or defeat a creditor or creditors).
What can a Prenuptial Agreement cover?
- How a couple’s assets and money will be divided in the event of a future separation. This also includes assets such as a family business, a trust, investments, an entitlement to an inheritance, superannuation or even a pension entitlement. It also includes debts and liabilities of the relationship such as an obligation under a contract.
- The financial support (maintenance) of either party (during the marriage and/or after divorce), and
- Any other incidental issues particular to you and your relationship.
It is highly recommended that you obtain legal advice from a lawyer who has sufficient experience and expertise to advise about Binding Financial Agreements if you:
- Are considering signing a financial agreement (or consent order); or
- Seek to change or cancel an existing financial agreement or consent order.
The failure of a party to obtain the correct and independent legal advice can (in certain circumstances) give rise to a court setting aside the agreement.