Prenups/BFAs for Professionals and Executives
Prenups and Binding Financial Agreements for Professionals and Executives: Protecting Your Career and Assets
When you’ve worked hard to build your career, reputation, and financial security, the last thing you want is for a relationship breakdown to jeopardise it all. For professionals and executives, the stakes in a separation are often higher—there may be business interests, shareholdings, performance bonuses, complex remuneration packages, or intellectual property in the mix.
Prenuptial agreements and Binding Financial Agreements (BFAs) give you the opportunity to define, in advance, how your assets will be divided if your relationship ends. They can offer certainty, reduce stress, and protect the wealth you’ve worked for—provided they are drafted and executed correctly.
This guide explains how these agreements work in Australia, why they’re particularly relevant for professionals and executives, what makes them enforceable, and what pitfalls to avoid.
Understanding Prenups and BFAs in Australia
In Australia, “prenup” is the informal term for a Binding Financial Agreement made before marriage or entering into a de facto relationship. Under the Family Law Act 1975, BFAs can be entered into:
- Before marriage or cohabitation.
- During a relationship.
- After a separation or divorce.
- The purpose is to set out how property, financial resources, and spousal maintenance will be handled if the relationship ends.
- For professionals and executives, these agreements are not just about dividing existing assets—they can also address future earnings, bonuses, stock options, and business valuations.
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Why They Matter for Professionals and Executives
- High-income earners and senior professionals often have:
- Complex remuneration structures (salary, bonuses, profit share).
- Ownership in companies, partnerships, or practices.
- Long-term incentive plans and share schemes.
- Intellectual property rights or royalties.
- High-value superannuation and investment portfolios.
- Without a BFA, these assets and entitlements form part of the property pool to be divided under family law principles. Even assets or entitlements acquired after separation can be relevant if they are connected to work done during the relationship.
Certainty: Avoid costly and uncertain litigation if the relationship ends. Court battles over asset division can drag on for years, drain resources, and distract you from your professional and personal life.
Having a BFA in place gives both parties a clear framework for settlement, minimising disputes and providing financial clarity. This certainty can also make negotiations less emotionally charged, as expectations are set in advance.
Privacy:
Keep sensitive business valuations and financial arrangements out of public court proceedings. Executives and high-profile professionals often have financial details they prefer to keep confidential—such as remuneration packages, intellectual property valuations, or trade-sensitive business information.
A BFA allows you to resolve financial matters privately, without exposing these details in open court. This discretion can also protect your company’s market reputation and prevent disruption to ongoing operations.
Customisation:
Tailor the agreement to your unique circumstances, including career-based benefits like deferred bonuses or intellectual property rights. Unlike court orders, which follow general legal principles, a BFA can reflect the specific nature of your profession and the assets tied to it.
This flexibility is especially useful for addressing complex entitlements such as share options, licensing income, or performance-based incentives. By customising the terms, you ensure the agreement works with your career trajectory rather than against it.
Case Law Insight: Thorne v Kennedy [2017] HCA 49
This High Court case emphasised the importance of fairness and proper procedure in BFAs. A wealthy property developer asked his fiancée, who had limited assets and English skills, to sign a prenup just days before the wedding, with the threat of cancelling the marriage if she refused. The court found the agreement invalid due to undue influence and unconscionable conduct. Takeaway for professionals and executives: Your agreement must be entered into freely, with adequate time for negotiation and legal advice on both sides. A “sign this or else” approach can backfire badly.
Key Benefits for Professionals and Executives
Asset protection:
Safeguard pre-existing wealth, inherited assets, or family business interests. For many professionals, these assets have taken years or even decades to build, and losing them in a settlement could have lasting financial consequences.
A BFA allows you to clearly ring-fence these assets from the property pool, ensuring they remain under your control. This is particularly important if you are part of a generational business or hold equity that cannot be easily sold without affecting other stakeholders.
Common Triggers for Considering a BFA
- Entering marriage or a serious relationship later in life with substantial assets.
- Owning a business, professional practice, or significant shareholding.
- Receiving an inheritance or a large capital distribution.
- Participating in an employee share scheme or long-term incentive plan.
- Holding valuable intellectual property, patents, or creative works.
What Makes a BFA Legally Binding
Both parties must receive independent legal advice from a qualified lawyer.
This is not just a formality—it’s a strict legal requirement under the Family Law Act. Each party must have their own lawyer, and those lawyers must sign a statement confirming they’ve explained the advantages, disadvantages, and effects of the agreement.
Independent advice ensures that both sides fully understand what they are agreeing to and helps prevent later claims of duress or misunderstanding. If this step is skipped or rushed, the entire BFA can be rendered unenforceable.
The agreement must comply with the technical requirements of the Family Law Act.
Even small drafting or procedural errors can make a BFA invalid. This means the document must meet strict formalities, such as being signed by both parties, accompanied by the lawyers’ signed statements, and drafted in accordance with the correct section of the Act.
Professional drafting by a family lawyer who understands complex asset structures—such as those common for professionals and executives—is essential. Courts have set aside BFAs in the past simply because the agreement did not meet these technical standards.
Full and frank disclosure of assets, liabilities, and financial resources must be provided.
Transparency is critical. Each party must disclose all significant assets, debts, superannuation, trusts, business interests, and future entitlements, like bonuses or share options. If material assets are concealed and later discovered, the agreement can be challenged on the basis of non-disclosure. Providing complete and accurate information not only strengthens enforceability but also demonstrates good faith in negotiations.
The agreement should be fair and reasonable at the time of signing—grossly one-sided terms can invite challenge.
While the law allows parties to make their own financial arrangements, terms that are blatantly unfair can lead to the agreement being overturned. Courts will consider whether the agreement was negotiated freely, without pressure, and whether each party had a genuine opportunity to protect their interests.
For professionals and executives, balancing asset protection with reasonable provisions for the other party can help ensure the agreement withstands future scrutiny. Fairness at the outset is often the best defence against later legal disputes.
Common Pitfalls That Lead to Invalidation
- Signing too close to a wedding or commitment ceremony without adequate time for review.
- Lack of proper disclosure of financial information.
- Undue influence, duress, or pressure to sign.
- Failing to update the agreement when circumstances change significantly (e.g., children, major asset acquisition).
Case Study: Executive with Deferred Bonus Scheme
An investment banking executive entered into a BFA before marriage, specifying that future performance bonuses would remain separate property. Years later, during separation, the other party challenged the exclusion of bonuses, arguing they were marital income.
Because the agreement had specifically detailed how these bonuses would be treated—and the terms were negotiated and independently advised—the court upheld the exclusion.
When You Should Review Your BFA
- Even a well-drafted BFA can become vulnerable if it’s outdated. Review your agreement when:
- You have children.
- Your asset base changes significantly.
- You change careers or move overseas.
- Tax laws or superannuation regulations change.
How to Approach Negotiating a BFA
- Start discussions early—ideally months before a wedding or cohabitation.
- Be transparent about your financial position.
- Consider compromises that make the agreement acceptable to both parties.
- Avoid “boilerplate” templates—get a tailored document that addresses your actual assets and career arrangements.
Hypothetical: Professional Practice Owner
You own a medical practice with two other partners. Without a BFA, your spouse could claim an interest in the business value during a property settlement, potentially forcing a sale or buy-out. With a properly drafted BFA, you could agree in advance that the practice remains separate, with other assets used to balance the division if needed.
Protecting Business and Intellectual Property
- For executives, entrepreneurs, and creatives, intellectual property can be a significant asset. A BFA can:
- Specify ownership of patents, trademarks, or copyrights.
- Allocate royalties or licensing income.
- Protect business goodwill and brand value.
The Role of Independent Legal Advice
Courts take the requirement for independent legal advice seriously. Your lawyer must explain the effect of the agreement and the advantages and disadvantages to you. The same applies to your partner—they must have their own lawyer.
Skipping this step, or using the same lawyer, can make the agreement unenforceable.
Costs vs. Potential Savings
While drafting a BFA can cost several thousand dollars, it can save hundreds of thousands—or even millions—in future legal fees and asset division. For high-income earners and asset-rich professionals, the return on investment is clear.
For professionals and executives, a well-crafted BFA is not about distrust—it’s about clarity, asset protection, and future-proofing your hard-earned wealth. With proper advice, full disclosure, and fair terms, you can create an agreement that stands up in court and allows you to focus on your career without uncertainty hanging over your personal life.