Prenuptial agreements can provide different things depending on the law in your part of the world, but do prenups work in Australia? In this article we’ll answer the most common questions about prenuptial agreements, how they work and why you might need one.
Firstly, What is a Prenup? And How Does It Work?
A ‘Prenuptial’ Agreement, also commonly known as a prenup, is a Binding Financial Agreement (BFA). This agreement is made before marriage to outline how their property and assets will be managed and/or divided if the relationship breaks down. In the event of separation or divorce, a prenuptial agreement will act to exclude particular assets from the spouses’ collective property pool.
These types of binding financial agreements are most commonly used when one or both parties have significant assets – maybe one spouse has more assets than their partner or maybe both spouses have assets they want to protect.
What Does a Prenuptial Agreement Cover?
Prenuptial agreements cover a variety of assets including:
- farms and other property
- lottery winnings and other lump sum payments
Are Prenups Enforceable in Australia?
In short, yes, a prenup is legally enforceable in Australia. The official name for a Prenuptial Agreement in Australia is a ‘binding financial agreement’ (BFA) under section 90B of the Family Law Act 1975.
In saying this, prenuptial agreements are commonly set aside by the Courts when determining final property orders. This may be for a range of reasons, such as unconscionable conduct (the use of undue influence, pressure or unfair tactics to make someone sign a blank or unfavourable contract), or, there has not been a full disclosure of assets, among other reasons.
As an example, a prenuptial agreement was set aside in a case where the husband and wife entered into it just days before their wedding. The wife was a student from Thailand and returned home when her visa expired. She later returned to Australia on a fiancé visa and fell pregnant.
The husband’s solicitors drew up a prenuptial agreement just five days before the couple’s wedding, despite the wife’s reluctance to sign. The husband told her that he would not marry her or sponsor her fiancé visa if she didn’t sign it.
The wife argued in family court that the agreement should be set aside because she entered into it under duress. The court found that the husband’s behaviour did constitute duress, as it put his wife in the position that she would return to Thailand pregnant without the father of the child. The pre-nuptial agreement was set aside.
How Much Does a Prenup (BFA) Cost in Australia?
Depending on the number of assets and the complexity of your case, creating a prenuptial agreement – or any binding financial agreement – can cost as little as $2,000-3,000 to over $10,000 in Australia (though there may be options that fall outside of this range). It’s best to speak with a lawyer about your individual circumstances and need to get a quote.
Do You Need a Solicitor for a Prenup?
You absolutely need a solicitor to create prenuptial agreements in Australia. Both parties are required to receive independent legal advice on the document before it can be considered as binding financial agreement.
Do Prenups (BFA) Expire?
Once entered into, financial agreements – including prenuptial agreements – do not expire under Australian law. In saying this, the agreement can be set aside by the Courts or terminated if both parties agree.
What are the Potential Pros and Cons of a Prenup?
As with any legal or financial agreement, there can be benefits and pitfalls. These pros and cons can impact how effective an agreement will be, which is why it is important to receive independent legal advice before signing any legally binding contract. The common pros and cons of prenuptial agreements in Australia include:
Pro: Possibly No Need for a Property Settlement
As the agreement will provide directions on how property and assets will be divided, it may be that you will not need a property settlement. A property settlement is part of the divorce or separation process and is another type of binding financial agreement. It outlines how the property pool will be divided between the two parties. If those decisions have already been made as part of a BFA, then there may not be any need for a property settlement (unless the prenuptial agreement is set aside by the Courts or there are significant assets that are not included in the agreement).
Pro: Can Save You Money and Stress in the Long Run
Another pro from not needing a property settlement is the time and money you can save during the divorce process. Dividing property and assets can take up a substantial amount of time in the divorce/separation process and become costly to sort out depending on the size and complexity of the property pool, as well as the cooperativeness of the parties. With an agreement already in place, it can significantly reduce the time and money spent on the divorce/separation.
Pro: Can Often Create Better Outcomes for Both Parties
Being transparent and clear about your individual and shared property and assets, and deciding on the division before anything goes wrong can be a great decision. While it might be uncomfortable to imagine what life might look like in a worse case scenario, it can provide the best outcome for both parties to make those tough decisions while you are on the same page and wanting the best for each other.
Pro: Protect Your Important Belongings and Assets
Although marriage is about sharing your life with another, there may be items, assets, property or businesses that are important to you or your family that you want to protect. There could be a number of reasons why a spouse would want to exclude certain items or assets from the property pool, including family traditions or a family business, or something else related to the individuals beliefs.
Con: Doesn't Always Cover Everything
Life is full of surprises and not everything can be anticipated. As a prenuptial agreement is made prior to marriage, it will cover assets you have at this time and will not include (unless you created an up-to-date post-nuptial agreement) any assets accumulated during your relationship. This may mean that not everything that would be considered property or an asset will be covered, and it also will not be able to account for each party’s financial circumstances at the time of separation.
Con: Can Be Put Aside in Court Proceedings
As mentioned earlier in the article, the Courts can decide to set aside your agreement for a number of reasons. Having a prenuptial agreement, while a legally binding financial agreement and legally enforceable, is a document that is taken into consideration during the divorce or separation process.
Con: Difficult Conversation That Can Create Tensions
Discussions around money can be difficult to have at the best of times. Having a conversation around property and asset division if the relationship breaks down adds another layer of tension for a lot of people. However well-intended you may be in wanting a prenuptial agreement, there’s no guarantee your future spouse will feel the same, so it’s important to think about options for navigating any tensions that may arise as a result.
Need Help with a Prenuptial Agreement? Contact BurkeMead Lawyers Today!
If you are considering whether a prenuptial agreement is worth it, our team of lawyers is here to help. Our expert family lawyers can assist you in creating an agreement that provides the best outcome for both parties and provides peace of mind as you prepare for the future.
Call 1300 292 700 or email [email protected]
About the Author
Emma Mead is an Accredited Specialist in Personal Injury Law, accredited by the Law Society of NSW. She is also a National Accreditor Mediator and has a Graduate Diploma in Family Dispute Resolution. She specialises in all personal injury and family law disputes, locally and across New South Wales.