What Is A Prenup?
‘Prenup’ is a shortened word for ‘prenuptial’.
The definition for prenuptial is – before marriage. Therefore, a simple definition for a prenuptial agreement is – an agreement you make before marriage.
Prenuptial agreements are becoming more popular for a whole range of reasons. One of them is that people today are more sceptical about the length of their marriages. With an increasing divorce rate, couples are wary of the possibility that they may have long and expensive legal disputes in the future.
Another reason is that people are generally marrying later in their lives, choosing to focus on their careers and accumulate assets before they settle down. By the time they do marry, the parties may have a portfolio of property that they would like to protect. Prenuptial agreements make this easy to do.
One of the biggest dilemmas in a divorce is deciding how to divide property and assets. Many prenuptial agreements are entered into to make this process a lot simpler. They also do not want any interference from the courts, and would rather determine their own future. Sacrificing a few minutes to plan ahead, has the potential to save headaches and financial difficulties in the long run.
Can I Get A Prenup?
Couples at any stage of their relationship can enter into such an Agreement.
Heterosexual or homosexual (de facto) couples can both enter into a BFA.
The types of Agreements and their relevant sections are the same for opposite or same-sex couples.
Both parties intending to enter into a BFA must ordinarily reside in Australia.
Each party must also get Independent Legal Advice from different lawyers working in different law firms.
The lawyers must also sign a Certificate confirming that the advice, as required by the Family Law Act 1975 (Cth) was given to their client before their client signed the Agreement.
You cannot enter into a BFA if you are already in a valid BFA with another person.
For example, you wouldn’t be able to enter into a BFA with a mistress if you already have a BFA with your wife.
What Can I Include In A Prenup?
A list of the property, assets, resources and liabilities you each own at the start of the relationship, together with their value
What you want to happen to your separate property, assets, resources and liabilities during the course of the relationship
How property, assets, resources and liabilities will be divided if the relationship breaks down
The effect of children on the provisions of the agreement, such as their impact on division of property
Whether wages or income will be combined or separate
who pays for the rent or mortgage, and, if both, whether this is equally divided
What will happen if one party becomes unable to pay their share of the rent of mortgage
The effect of one party becoming a stay at home parent or working part-time, and how this will affect access to income
Whether spousal maintenance will be payable if the relationship breaks down
When Can I Enter Into A Prenup?
You may enter into a prenup at any point in your relationship.
Having a financial agreement in place ensures that you make your own rules about how you would like to split your assets in the event that you decide to separate in the future.
You do not need to have entered into a financial agreement before a relationship or marriage.
You can see a lawyer at any point to get it done.
This means you can get it done during a relationship, after your marriage, even after you separate.
Be mindful that both people in the relationship will need to receive independent legal advice to ensure that the financial agreement is valid.
It is not usually recommended that couples sign a financial agreement immediately before their wedding, as it could later be argued that the financial agreement was only signed because there was pressure on one side to pull out of the wedding.
In certain circumstances, if you enter into a financial agreement before having children, and separate and try to rely on the financial agreement after having children, a court may say that the financial agreement is no longer binding on both parties.
There are different types of financial agreements depending on the nature of your relationship.
It is important that you make an agreement that is suitable to your circumstances.
Different Binding Financial Agreements
Most people mistakenly believe that prenuptial agreements, entering into an agreement before a marriage, are the only financial agreements that you can enter into.
The different types of financial agreements depend on the type of relationship you have and at what stage you are making the financial agreement:
- Wanting to live together as a de facto couple and are not yet living together, you would enter into a Section 90UB Cohabitation Agreement
- Living together as a de facto couple, you would enter into a Section 90UC Cohabitation Agreement
- Intending to marry, you would enter into a Section 90B Pre-Nuptial Agreement
- Already married, regardless of whether you intend to stay married or separate, you would enter into a Section 90C Post-Nuptial Agreement
- Separated, you would enter into a Separation Agreement. There are different forms of Separation Agreements.
- Section 90UD is for a de facto separation
- Section 90D is for separation if the parties were married
- Already divorced, and you want to document property settlement matters in a Binding Financial Agreement, you would enter into a Section 90C Divorce Agreement
Ensuring Your Prenup Is Binding
There’s not much point preparing a document that isn’t going to be binding on both parties. You want to ensure that your assets are protected and you don’t want to experience any expensive divorces, therefore you must ensure that you follow the strict protocols when drafting the financial agreement. Your Financial Agreement may not be legally binding on both parties and most noteworthily, it could leave you exposed to a potentially expensive lawsuit. Here are 5 simple rules to ensure that your financial agreement is binding:
1 – The document is signed by both parties;
2 – Each party has received independent legal advice;
3 – A statement from each party’s lawyer advising them of the advantages and disadvantages of signing the financial agreement. This statement needs to be attached to the agreement.
4 – Once signed, one party keeps the original agreement & the other party will keep a certified copy.
5 – A declaration of separation must be signed. This needs to contain 3 things: That the parties have separated. That there is no reasonable likelihood for you to reconcile. That the relationship will not restart at any point.
Make sure when drafting your Binding financial agreement, you ensure that you choose the right agreement. Failure to choose the right agreement may make your agreement void and unenforceable.