Planning Ahead: What You Need To Know About Prenuptial Agreements
- July 2, 2015
- 1 Comment
By Christopher Tran, Associate Lawyer at Kingston Lawyers Pty. Ltd.
The family law jurisdiction can be a traumatic experience. The process can be extremely long, adversarial and incredibly stressful financially and emotionally for all parties involved however much of this can be mitigated by planning ahead.
The word “pre-nup” or “prenuptial agreement” is often spoken, particularly by the media in relation to extravagant celebrity breakups, and although it can be an awkward and difficult topic to talk about with your partner or spouse it may be the most important document you will ever sign as far as your assets are concerned. As Mr Kanye West has eloquently put in his five time platinum hit, Gold Digger, a pre-nup is something that you need to have if you do not wish to be considered a member of the punk movement – or something along those lines.
In Australia a pre-nup is formally known as a Binding Financial Agreement (“BFA”). A BFA is an agreement between you and your partner or spouse which can be made before, during or after your relationship – this includes de facto, married, opposite and same sex couples.
A BFA provides you with the flexibility to make your own decisions with how your property will be divided should your relationship fail. The agreement indicates what will happen to your assets, finances and liabilities and it can be an extremely valuable document particularly for those wanting to avoid long and costly court battles. However the question as to whether BFA’s are legally binding is often raised as a result of how they have been received by the Family Court over the years.
The complexities of BFA’s are often overlooked and as a result they are generally set aside by the Court. However this is not to say that BFA’s are completely ineffective and if you are considering a BFA here are a number of things you need to do/should be aware of:
- You and your partner/spouse must obtain independent legal advice from separate lawyers before signing the agreement – both parties should be advised of what they are agreeing to, their obligations and how a change in circumstances may have an effect on the agreement. Failure to obtain this advice may render the agreement void.
- Do not feel pressured into signing something you do not agree with or understand– this may occur during stressful times particularly leading up to a wedding. You should never be coerced into signing an agreement especially if you do not know what you are agreeing to.
- Be aware that your circumstances will change and what you will agree to may not have any effect in the future. You should be prepared, consider all possible contingencies and make provisions as to what will happen in the event that such contingencies were to arise. Changes in circumstances may include having children or if you or your partner/spouse became terminally ill.
- Ensure that the agreement satisfies all the technical legal requirements.
- Ensure that you make full disclosure of your assets and liabilities. Failing to do so may constitute fraud and the agreement may be set aside.
- Be prepared to negotiate. Allow you and your partner/spouse time to consider each other’s proposals. This may be strenuous and frustrating process however it is important to remain patient and persistent to ensure the agreement fulfils the needs of both parties. Keep in mind that although BFA’s can be made at any time, parties who begin discussions at an early stage of their relationship are more likely to reach an agreement sooner rather than later.
- Do not be fooled by DIY pre-nuptial agreements as they are more than likely to be set aside by the Court. Arrange an appointment with a lawyer and get legal advice.
Here is an example:
Successful builder Harry aged 68 has just come out of a messy divorce and decides to start living with Candy 32, a waitress at his nearby strip club.
Harry has five million dollars in assets from his divorce and Candy has $50,000.00 in credit card debts at the start of the relationship. Harry and Candy agree to enter into a financial agreement under the Family Law Act 1975 since Harry wants to make sure his assets are protected in case he and Candy break up. He also wants to ensure his money will go his two children from his previous marriage. Each party enters into the pre-nuptial agreement. The agreement recognises that they are financially not equal, and contains a clause that in the event the parties separate, Harry will pay to Candy $100,000.00.
After two years and ten months, in a moment of joy whilst in Las Vegas, the parties get married by an Elvis impersonator called Larry. Unbeknown to Harry, Larry and Candy sleep with each other on the night of the wedding. Harry discovers this and immediately tells Candy the relationship is over and gives her a cheque for $100,000.00. Candy comes back to Melbourne and using the money from Harry commences a legal proceeding to set aside or “rip up” the pre-nuptial agreement. The Court dismisses Candy’s claim on the basis that it was entered into correctly and Harry has honoured its terms.
If you are considering a BFA call us on 8676 0525 to arrange an appointment with our experienced solicitors.