‘Hey soon-to-be spouse, do you want to sit down and discuss what will happen with our assets if we break up?’
It’s hardly the most romantic request in the world, especially when you’re about to tie the knot, but discussing these issues at the beginning of a marriage can prevent significant conflict in the future.
The document that outlines matters of property and finance before a couple enters into marriage is known as a prenuptial agreement. Prenuptial agreements are often perceived with negativity, and notions that such an agreement sets a marriage up for failure are common.
However, marriage breakdown is an all too common reality and in the unfortunate event of separation or divorce, a prenuptial agreement can be a helpful tool in resolving issues and preventing costly legal battles.
What is a Prenuptial Agreement?
A prenuptial agreement is a financial agreement (otherwise commonly referred to as a Binding Financial Agreement or “BFA”) that is entered into before marriage and deals with matters of property and financial resources. Such an agreement formalises property and financial arrangements following the breakdown of a marriage and is legally binding on both parties. Provided a BFA has been drafted correctly, it essentially removes the necessity and jurisdiction of the court.
Whilst not the subject of this blog, it is worthy to note there are two other types of BFAs into which parties may enter, namely, one during marriage (or de facto relationship) and one after they divorce (or de facto parties permanently separate).
Advantages of a Prenuptial Agreement
Australians are choosing to walk down the aisle much later in life with the average bride saying ‘I do’ at 29 years of age, and the average groom at 31 years. Second marriages later in life are also more common. By this time many individuals will have accumulated assets including property, superannuation, or shares and their income may be higher. One of the main advantages of a BFA is protection of these assets and future assets.
A BFA will document each spouse’s separate assets and protect them as separate assets. In addition, it will define marital assets and outline their distribution. A couple may include other provisions to detail any special arrangements, such as spousal maintenance and establish procedures for dealing with any issues that arise in the future. For example, special provisions may be given where a spouse has been engaged in full time study.
As a result, a BFA is particularly effective in reducing conflict in the event of a marriage breakdown and one that has been drafted carefully will provide clear directions, thus eliminating lengthy court proceedings and significant legal fees if there is a dispute. A BFA can even detail how disagreements should be settled, such as using mediation or arbitration.
As well as assets, a BFA is useful in protecting a business and other estate beneficiaries. In the same way that such document protects assets, it can also protect a party from their spouse’s debt, for example, university loans, mortgages or credit card. Assigning debt to one party means both are not held liable.
While a BFA may not be suitable or even necessary for all couples entering into marriage (or a de facto relationship), it is helpful to think about the above issues and seek independent legal advice. A lawyer who specialises in family law will be able to advise what is covered under the relevant law and where a BFA may be necessary or advisable. A little research now could save a lot of heartache and stress later.
Setting up a Prenuptial Agreement
Discussing a BFA together as a couple is the first step to setting one up. Start by individually listing separate assets and any other financial issues. Take a practical approach, and set aside emotions as much as possible. It’s important that the rights and obligations of both parties are considered as both need to willingly agree to a BFA in order for it to be binding. It’s also important to note that even though a BFA cannot be amended, it can however be terminated and replaced with a new BFA incorporating different terms during the marriage (or de facto relationship) if circumstances change and the parties agree.
BFAs are covered under the Family Law Act 1975 which stipulates that they must be signed by both parties and both parties need to have sought and obtained independent legal advice before signing the document.
In addition to those basic requirements there are a number of rules that must be followed when putting together a BFA. One that has not been drafted carefully can be ultimately set aside by a court if and when challenged. It is therefore important to seek the advice of a family law specialist.
At Taylor & Scott Lawyers, our Family Law team can advise you on the necessity of a BFA, draft the document, provide independent legal advice on its terms, assist with terminating a current agreement and ensure its enforceability. Personal care and an understanding of the inherent emotional issues that arise within such a complex part of the law go hand-in-hand with years of family law experience.
Arrange to meet with a family law expert today.
At Taylor & Scott “We Care For You”.
