A prenup (called a “binding financial agreement” in Australia) is the only way a party in a relationship can seek to protect their wealth or assets in the event of a divorce or separation.
Of course, to read the tabloid headlines, it would be easy to conclude that a prenup is the go-to tool of the rich and famous who are seeking to protect their wealth from their partner or spouse in the event of separation.
In reality, a prenup is not just for the rich and famous and a properly written prenup can offer reasonable protection to one or both parties who are bringing significant wealth or assets into a relationship.
So let’s take a look and see how prenups work in Australia.
What is a Prenup?
A prenup is an agreement between two people planning to get married or live together in a de facto relationship.
It sets out the various assets and liabilities that each person has when they enter into the relationship and their agreement on what will happen with those assets and liabilities if they separate.
As you might expect, what people are really doing here is agreeing up front on things that might otherwise be the subject of negotiations or Court orders following separation.
Do Prenups Stand Up in Court?
A properly drafted prenup, where the processes are followed correctly, should usually stand up in Court.
For a prenup to be legally binding:
- It must be in writing;
- Each person must sign it voluntarily (free from undue pressure, coercion or threats);
- It must contain full and frank disclosure of each person’s financial circumstances;
- Both parties must receive independent legal advice from an Australian lawyer before signing; and
- It must otherwise comply with the provisions as set out in the Family Law Act 1975.
When Might a Prenup be Set Aside?
While the best starting point is to assume a prenup will be binding, there are some circumstances when the Court may consider setting aside a prenup.
Generally, these are when the procedures above have not been followed, there is evidence of unconscionable conduct on the part of one party or where there has been a material change in circumstances.
So, for example, a Court might set aside a prenup if:
- The prenup was obtained by fraud. For example, one party fails to honestly disclose their financial circumstances;
- There is evidence that the prenup was signed under coercion or duress. An example of coercion or duress would be where one party tells the other party that they will not marry them unless the prenup is signed. If someone signs the prenup on the day of the wedding, this is also considered to be under duress.
- One party has not been given appropriate time to consider and negotiate the terms of the prenup before signing it;
- The parties did not obtain independent legal advice (either no advice at all or there is evidence the advice was not independent); and
- The agreement did not make any provision for future children, and the parties have since had children, then the Court might set it aside if a party will now suffer hardship as a result.
This is not an exhaustive list.
What Kinds of Things can you include in a Prenup?
A financial agreement can cover a range of different factors, but some common inclusions are:
- Protecting the assets brought into the relationship by one, or both of the parties, by ensuring those assets remain with the party who brought them in, but otherwise providing for a division of the wealth accumulated during the relationship between the parties;
- Providing, in advance, for whatever financial settlement the parties agree on. This is sometimes altered depending on the length of the relationship and whether there has been a material change in circumstances; and
- Quarantining certain property of value that has a special purpose, such as family heirlooms, land or significant items.
Can you Get a Prenup After You Get Married?
Yes – you can negotiate and execute a binding financial agreement before or during a marriage or a de facto relationship.
Can you Make your Own Prenup?
You really shouldn’t.
First, both parties are going to need to obtain independent legal advice for the agreement to be binding.
Next, like many areas that sound straightforward, drafting a prenup and following the correct process in a way that will be binding on the parties many years down the track isn’t actually that easy to those who aren’t family lawyers. You wouldn’t want to find out in ten years that the prenup you wrote yourself failed to tick a required box and is therefore not binding.
If you’re getting a prenup because you want to protect your wealth, then by far the best decision is to invest some of that wealth in getting the right family lawyers to prepare your prenup for you.
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