Prenuptual Agreements

When you enter into a new marriage or de facto relationship, you may not initially turn your mind to protecting your assets. However, it’s important for your future that you think about asset protection.

Anyone who is contemplating entering into a new marriage or a de facto relationship and wish to protect their assets, in the event of separation, should consider getting a prenuptial agreement. This will be used to specify how property and debts will be divided in the event of a relationship or marriage breakdown.

Whether it is your first serious relationship or you are hoping it is your last, entering into a prenuptial agreement or prenup if:

  • You have been through a property settlement with a former partner or spouse and wish to avoid the emotional and financial toll of doing it again.
  • You wish to protect your assets for the future benefit of your children from a previous relationship.
  • You want to have certainty with how the assets will be divided if a break up occurs.
  • You are in a stronger financial position entering into the relationship and want to ensure that you are not at risk of losing all or part of the assets you entered the relationship with.

What is a prenuptial agreement or prenup?

In Australia, the legal term used for a prenuptial agreement or prenup is a financial agreement that is entered into before a marriage or before a de facto relationship. Sometimes these types of agreements are also known as binding financial agreements or ‘BFA’s. The Family Law Act of Australia 1975 governs these types of financial agreements pursuant to section 90UB (de facto) and section 90B (marriage).

You can also enter into a binding financial agreement during a marriage or de facto relationship or after the date of final separation or divorce.

Benefits of having a prenuptial agreement in place

Parties don’t (usually) enter a marriage or relationship thinking it’s going to break down. But a financial agreement can provide an “exit plan” in the event that the “worst case scenario” arises.

The important thing is if there is no separation, the terms of the financial agreement are never triggered. In that way, the financial agreement protects parties from the worst case scenario if their relationship does break down.

Another benefit is that parties can enjoy their relationship in the knowledge that they have already discussed the things that are important to them both, and agreed on them in a calm, reasonable environment where they have each been represented by an independent lawyer; each party is motivated to ensure the relationship continues as amicably as possible; and both parties are able to have sensible, level-headed discussions about what should happen if they were to separate. This helps avoid the emotion, stress, and uncertainty involved with trying to negotiate a settlement if separation occurs.

The most obvious benefits include the following:

  • Certainty. You and your partner can set out in precise detail the way that your net assets and resources will be divided between you if you separate in the future.
  • Finality. The financial agreement sets out how your assets will be divided, in a way that ensures that the Family Court cannot negate or alter the agreement. This makes sure that any potential dispute is dealt with by the agreement itself.
  • Security. A financial agreement offers peace of mind about how future arrangements will be carried out. This means both spouses can make plans without worrying what will happen in the future.
  • Tax Benefits. Transactions that are carried out pursuant to the terms of a financial agreement attract the same benefits as Court Orders. This means that parties who are to receive or exchange property can get substantial on Capital Gains Tax and/or state transfer duty in the appropriate cases.
  • Prenups are Private. Only the parties and their lawyers are involved in working out the terms of the agreement. This is very different from court proceedings, where family and friends can be called as witnesses, and proceedings can be viewed by other litigants in court.
  • Time and Cost. Preparing and entering into a financial agreement is not usually a protracted process. Once the parties agree on its terms, a financial agreement and the accompanying letter of advice can be prepared usually within one to two weeks. By contrast, if parties separate, there is no financial agreement in existence, and they are unable to agree on how to reorganise their assets and finances, they may have to engage in Court or other dispute resolution – and this will involve costs significantly higher than the preparation and execution of a prenup, and usually it takes months and sometimes years to resolve.

Best way to approach this conversation with you partner

Obviously, the best way to approach the conversation with your partner will depend on your relationship. Everybody’s relationship is different. It might be helpful to discuss prenuptial agreements in the same way you address other future planning together, for example, planning to make a new Will, plans about moving in together or having children together, and other plans around the significant life changes you expect to occur. It is helpful to discuss the benefits and the potential disadvantages, of a financial agreement to each of you.

Parties who want to avoid the delay and the lack of control that accompanies Family Court proceedings will probably find a financial agreement attractive.

It is also helpful to consider the other influences that can affect a relationship in the future. There are many stories of relationships that ended badly when well-intended advice from family members and friends influenced decision making and caused more heartaches than help.

If you are the financially stronger party, it is very important that you do not exert pressure on your partner to enter into the financial agreement. The Court has power to overturn or ‘set aside’ financial agreements if the other side is able to demonstrate that they did not want to enter into a financial agreement but felt pressured into doing so.

Hickey Lawyers can assist you in drafting your prenuptial agreement

Our Gold Coast family lawyers have extensive experience in drafting and providing advice about entitlements and the effect of the financial agreement on you and your future. Whether your pool of assets and liabilities is very straightforward or structured in an intricate and complex way, we can be of assistance to you.

If you are wanting to protect your assets, it is important to know that a financial agreement can have whatever terms you and your future spouse or de facto partner agree to. But once the agreement has been entered into it will become legally binding.

You will both need to get independent legal advice from different family lawyer before you enter into the agreement. The reason for this is that you don’t need to register or have the agreement reviewed by the Court, which means that you both need to know exactly what you are signing up to, by way of the terms of the agreement, and need to know what financial effect it will have on you both. In light of that, there are certain requirements that need to be met.

If you are considering entering into a financial agreement, it is imperative that you speak to an experienced family lawyer who is aware of the requirements needed to ensure the agreement is binding and enforceable.

If you seek advice from a solicitor who is not familiar with the Family Law Act 1975 and cannot articulate the effect the agreement will have on your rights, you may be putting yourself at risk of having the agreement set aside at some future stage.

EXPERIENCED LAWYERS

Jill Wolff

Special Counsel

BA, JD, GradDipLP

Jill heads our Family Law area of practice, bringing experience, knowledge and a practical approach to the firm.

+61 (0)7 5556 7439

Hannah Marchmont

Solicitor

LL.B, GradDipLP

As a member of the Hickey Lawyer’s Family Law team, Hannah advises clients on a range of Family Law matters including parenting, property settlements, de facto relationships and divorce.

+61 (0)7 5556 7457