What Does a Prenuptial Agreement Do?

Prenuptial agreements are not just for rich millionaires wanting to protect their assets. A prenup is a good idea for anyone that gets married as well as for de facto couples. No-one expects a marriage or a relationship to end, but people still take out health insurance without the expectation of ending up in hospital, so think of it as just another type of insurance policy.

Prenuptial agreements differ around the world, so let’s go through what a prenuptial agreement entails here in Australia.

Under Australian law, a “prenuptial agreement” is known as a binding financial agreement (BFA) with the powers and abilities of the Courts to enforce a BFA found under the Family Law Act 1975. It is essentially an agreement between a couple that is thinking about marriage or entering into a de facto relationship.

Many people may not realise that if they are in a de facto relationship that their partner automatically has rights after certain criteria are met. Two years of living together, having a child or having made significant financial contributions all allow someone to make a claim. As many de facto relationships start out casually the two-year time frame can come around quickly. If you do not intend for your assets to merge, then you should get a binding financial agreement to outline your wishes.

A BFA (prenuptial agreement) covers financial matters and may include spousal maintenance matters, among others.

Benefits of a BFA

A BFA (prenuptial agreement) is a great way to protect your assets in some given circumstances and comes with the following advantages:

• It can address specific assets and/or properties that you really want to protect.
• A BFA (prenup) can address assets which you would like to ‘quarantine’, such as pre-marriage assets, that you have acquired on your own and exclude your partner from making a claim to them if the relationship fails.
• If expecting large inheritance in the future, you can make a BFA (prenup) that will exclude your partner from claiming said inheritance.
• If you and your partner are in agreement, the BFA can be revised every few years, or when circumstances change (such as having children). You will be able to make financial agreements during the marriage or de facto relationship so they can be updated and replaced at any time, so you always have a binding agreement to reflect your current circumstances.
• They are beneficial for blended families, particularly those who are onto their second or third marriages or de facto relationships, especially as research shows that subsequent marriages have much higher fail rates than first marriages.
• BFAs help simplify the negotiation process if the relationship fails.

Starting a conversation earlier about a prenup agreement can be beneficial and make it easier to address than waiting until later. It is beneficial for both parties to have a clear agreement in place if the relationship ultimately fails. It will save a lot of stress and additional fees if there is a dispute after a separation.

It is important for both parties to be able to open and freely discuss the agreement, so everyone is comfortable with going ahead with one. This means it is less likely the agreement will be contested later down the track.

Obtaining proper legal advice is essential for both parties to make the financial agreement binding especially prenup agreements. If legal advice is not provided to each partner the agreement can be simply overturned.

PCL Lawyers in Melbourne have a team of expert family lawyers that can guide you through the steps of drafting up a prenuptial agreement and advise you on the best steps to take. For more information, contact one of our family lawyers here, or by phoning 1800 907 335.

About The Author - Theresa Morgante

Theresa is a Senior Associate of our Family Law and Estate Planning practice groups. Theresa's practice includes acting for clients across a broad range of complex family/relationship matters as well...