Covid 19 has impacted all our lives very quickly and in a very unplanned way. Couples that would have not considered moving in together for months or longer have done so due to the social distancing rules. However, that is exactly the reason why you should now consider a binding financial agreement. There is often a negative stigma attached to them, however just like with anything in life, it is always good to be prepared if the worst should happen. The old saying goes: “Nobody plans to fail, but many fail to plan”. Prenups can be seen as a form of risk management, or a safety precaution, for your life. While nobody wants to think they would ever need one, the reality is that one in three relationships in Australia ends in separation, without the stress of social isolation, so it is definitely worth thinking about.
What is a Prenuptial Agreement (Prenup)?
A prenup is a Binding Financial Agreement (BFA), according to the Family Law Act. It is a legally binding financial agreement between two people who intend to marry. A similar agreement can also be prepared if two people are planning to live together as a de facto couple.
A prenup identifies the assets and debts of each person entering the marriage, and states what will happen to these if the marriage were to end (divorce or separation), and how the couple’s finances will be split.
When is it Appropriate to have a Prenup?
While there is never a wrong time for a couple to get a prenup, there are some situations where they may be especially important. These include where:
- One person has much more property and/or other assets when the relationship begins,
- One person is, or later will be, entitled to an inheritance or gift,
- One or both people are entering into a subsequent marriage where children from a former relationship might need to be protected financially, or
- Both people simply want to ensure the division of assets and debts is agreed to upfront to avoid it later ending up in court.
What about De Facto Relationships?
Any of the situations above may also apply to de facto relationships. Since 2009, almost all of the same rules apply to de facto relationships as they do to marriages. Whether your relationship is considered de facto will be determined with regard to matters such as the length of time you have been together, whether you live together, whether you have children, and whether you have combined your finances.
Requirements of a Legally Binding Prenup
It is essential that a prenup is done correctly. There have been many cases where legal ‘slip-ups’ have resulted in the Court having a prenup set aside. This means that assets are left open to being distributed as the Court sees fit, rather than according to your agreement. Protect yourself by making sure your prenup satisfies the following criteria to be legally binding:
- It must comply with the strict legal guidelines outlined in the Family Law Act (1975).
- It must be in writing.
- Each person must have obtained independent legal advice prior to signing the prenup.
- Each person must have entered the prenup voluntarily. This means free from undue pressure or coercion.
- It must fully disclose each person’s financial standing – assets, liabilities, expenditure, and income.
When will Prenups NOT be Enforced?
Prenups will be unenforceable in a number of circumstances. Common reasons why prenups are overturned include:
- If a prenup does not provide for circumstances relevant to future children.
- If a party pressures or coerces the other into signing the prenup.
- If a prenup is not fair and equitable to both parties.
Get Advice Today
If you have any further questions or would like advice for your personal situation, please don’t hesitate to contact me. We have a new Relationship Package designed for Couples who want to protect their relationship through this stressful time.