Are Prenuptial Agreements Enforceable?
For many of us, the term ‘Prenuptial Agreement‘ brings to mind celebrity marriages and divorces. In Australia, we use the term ‘Binding Financial Agreement’ and it should be noted that they are not just for the rich and famous. A Binding Financial Agreement is legally enforceable and if you have assets that you wish to protect in the case of relationship breakdown, you may wish to consider making one.
Many people shy away from the idea of a ‘prenup’, considering it to be mercenary or an assumption the relationship will fail, however, for those in particular financial circumstances, they can be a way to have clarity and avoid uncertainty surrounding financial matters.
What is a Prenuptial Agreement (or Binding Financial Agreement)?
A Binding Financial Agreement is an agreement between two people who are entering a de facto relationship or getting married. Agreements most commonly address financial matters such as the division of assets or setting out terms relating to spousal maintenance in the event that the relationship breaks down.
Who may need a Binding Financial Agreement?
It’s not just the super wealthy who can benefit from a prenuptial agreement. Other circumstances where an Agreement may be useful include:
- Where a partner owns a business.
- Where one or both partners have children from an earlier relationship and they have assets they wish to pass to those children.
- Where one partner is moving into the other’s home.
- Where you wish to avoid property division negotiations that are subject to principles of the Family Law Act.
- Where one partner wishes to protect a future inheritance.
Is a Binding Financial Agreement enforceable?
A Binding Financial Agreement, by its very nature, is designed to work outside of the division of assets principles detailed in the Family Law Act.
For an agreement to be legally binding it must meet strict criteria. If it does not, it risks being overturned by the Family Court and for this reason, we strongly recommend seeking the advice of a Family Law Specialist when considering entering into prenuptial agreement or Binding Financial Agreement.
A Binding Financial Agreement must comply with the following::
- Each party must receive independent legal advice from an Australian lawyer that includes a statement as to the effect of the agreement on the party, the advantages and disadvantages of the agreement and whether the provisions are equitable.
- The agreement must be in writing;
- Be drafted and signed in the presence of a lawyer and
- The agreement must contain a complete disclosure of assets, liabilities, expenditure and income;
The Family Court can set aside an agreement if it is satisfied that:
- the agreement did not include disclosure of all assets
- either party did not obtain independent legal advice
- either party to the agreement has been involved in unconscionable conduct in the preparation of the agreement
- either party has signed the agreement under duress
Future children and prenuptial agreements
When entering into a Binding Financial Agreement, it is important to make mention of the possibility of having children in the future. Even if you are not sure at the point of making the agreement whether you intend to have children, the agreement should include the possibility and how this will impact the division of assets stipulated under the agreement. Failure to do this may be grounds for the Family Court setting aside the agreement.
The Family Law Act 1975 states that a prenup can include provision for child support, but only if the child has already been born and the maintenance figure payable is included in the agreement. It should always be noted any financial agreement, including a Binding Financial Agreement, can be overturned by the Court if they are found to be not in the best interests of the child.
At Umbrella Family Law we’re all for love and the thrill of new relationships, but understand that some may benefit from the peace of mind and certainty offered by protecting assets with a Binding Financial Agreement. If this sounds like you, contact us to learn how we can help you move confidently forward into this new phase of your life.