Protecting assets without a prenuptial agreement in Australia involves several legal strategies and financial planning methods.
One common approach is creating a Binding Financial Agreement (BFA) under the Family Law Act 1975, which serves a similar purpose to a prenup but can be established before, during, or after a marriage or de facto relationship.
Individuals can also develop discretionary trusts to shield assets from personal liabilities.
Maintaining separate bank accounts, having clear documentation of assets, and regular financial reviews are practical steps for safeguarding one’s financial interests.
Additional measures include using corporate structures to hold assets, understanding superannuation considerations, and obtaining insurance policies for asset protection.
Given the complexity of family law, consulting with an experienced family lawyer is highly recommended to tailor strategies to individual circumstances and ensure compliance with Australian regulations.
How Do Courts Decide Upon Assets that Are Documented to Be Separated?
In a divorce or separation, courts undertake a comprehensive process to decide upon assets, including those the parties may have previously agreed or documented to be separate. Here’s how the process typically unfolds:
- Courts begin by identifying all assets owned by both parties. This includes everything acquired before and during the marriage, such as real estate, bank accounts, investments, and personal property. This stage is fact-finding to get a clear picture of the couple’s financial situation.
- If there are any pre-existing agreements or documentation about certain assets being separate, courts will consider these. Such agreements include prenuptial or postnuptial agreements or other written agreements made during the marriage. The validity of these agreements will be scrutinized, and they must have been entered voluntarily, with full disclosure, and without duress for them to be enforceable.
- The court assesses each party’s contribution (financial and non-financial, including as homemaker or parent) to the acquisition, conservation, or improvement of any of the marital or separate assets. This assessment isn’t just about direct financial contributions but also contributions to the family’s welfare.
- The court will consider factors such as age, health, financial circumstances, earning capacity, and care of children when assessing each party’s future needs. This ensures that any asset separation won’t unfairly disadvantage one party.
- The overarching principle in these decisions is the equitable distribution of assets. Considering all circumstances, the court aims to make orders that are fair to both parties. This doesn’t always mean a 50/50 split of assets; the division is based on what’s deemed just and equitable.
- Once the court has considered all relevant factors, it has the discretion to make orders dividing the assets. These orders can include transferring property, paying a lump sum, splitting superannuation or pension plans, or any combination.
Throughout this process, the court relies on comprehensive financial disclosures from each party. Any attempt to hide or undervalue assets is frowned upon and could lead to legal penalties and an unfavorable outcome for the offending party.
Thorne v Kennedy 2017
The wife was a 36-year-old Eastern European woman who met her husband, a 67-year-old Australian property developer, online. The husband flew to the wife’s home country and proposed to her. The husband clarified that he required the wife to sign a financial agreement before they could get married.
The husband’s lawyers drafted the financial agreement heavily in his favor. It provided that the wife would receive nothing from the husband in case of separation or divorce, even if she made significant financial contributions to the marriage.
The wife signed the financial agreement under duress. She felt she had no choice but to sign the deal, as she was in a foreign country and had no financial resources.
The couple separated after only a few months of marriage. The wife sought to have the financial agreement set aside because it was unconscionable.
The High Court of Australia set aside the financial agreement. The Court held that the wife had been under duress when she signed the agreement and that the agreement was unconscionable because it heavily favored the husband.
The Court’s decision in this case is a reminder that courts will consider all of the circumstances when deciding whether or not to uphold a financial agreement. Courts will be particularly likely to set aside a financial agreement if there is evidence that one party was under duress or that the agreement is unconscionable.
Implications to Court Decisions
The High Court’s decision in Thorne v Kennedy reshaped how prenuptial agreements are perceived under Australian family law. It emphasized that such agreements could be set aside under circumstances involving exploiting a more vulnerable party. This case has had a lasting impact on family law in Australia by:
- Protecting your assets through financial agreements is not the only thing being considered by the court when it comes to asset separation documentation
- Highlighting fairness and equitable conduct’s significant role in forming prenuptial agreements.
- Establishing that courts will scrutinize the conditions under which a prenuptial agreement was signed, not just the agreement’s content.
- Emphasizing the need for both parties to have comprehensive and independent legal advice and enter the agreement voluntarily and without coercion.
The case is a caution for those seeking to protect their assets through a prenuptial agreement, underlining the necessity for the process to be fair, transparent, and free of any undue influence or pressure.
Want to Know More About How To Protect Your Assets Without A Prenup?
At Justice Family Lawyers, we’re dedicated to empowering you through this critical journey.
Our seasoned team doesn’t just offer legal advice; we provide peace of mind and a clear path to securing your financial future.
With personalized strategies, we’ll safeguard what’s rightfully yours; no prenup is needed. Reach out today and invest in certainty—let’s protect your assets with expertise only Justice Family Lawyers can deliver.
Principal of Justice Family Lawyers, Hayder specialises in complex parenting and property family law matters. He is based in Sydney and holds a Bachelor of Law and Bachelor of Communications from UTS.