A prenuptial agreement is a contract between two parties in an intimate relationship, usually made before or during a marriage or de-facto relationship.
The purpose of a prenuptial agreement, commonly referred to as a ‘prenup’, is to clearly define the extent to which property or assets are shared while a couple is together or divided if they break up.
Discussing a prenuptial agreement will not always be an easy conversation with your partner. The bright side is that a prenuptial agreement ensures everyone is on the same page regarding financial considerations, leaving little room for any confusion.
Is a Binding Financial Agreement the same as a prenuptial agreement?
Yes. A Binding Financial Agreement is the legal term for a prenuptial agreement under Section 90B of The Family Law Act of 1975. They are legally recognisable and enforceable by courts in Australia, as long as they are created and maintained in line with relevant laws.
A court can overturn an existing prenuptial agreement for several reasons, though. This may happen if either party:
- Did not access independent legal advice and obtain a clear understanding of the conditions
- Was under any type of pressure or duress to sign the contract
- Fraudulently signed the contract, for instance, failed to disclose assets without communicating this
Both parties need to ensure they have correct legal advice and guidance before signing anything, to ensure that the contract is fair and valid.
What factors make a couple consider a prenuptial agreement?
Contrary to popular belief, it’s common for two people to choose to enter into a prenup together to protect their future financial interests. If your partner has asked you about drawing one up, it doesn’t mean they don’t trust you. Many couples find peace of mind in having a legal agreement in place.
There are many reasons couples will decide to create a prenuptial agreement. Some common examples include when either party:
- Has a significant amount of wealth or debt, or if one party has a relatively large amount of either compared to the other party
- Has a significant inheritance or children that they would like to inherit their assets
- Have a business they want to protect in the case of a relationship breakdown
- Will not be financially contributing to the relationship but would like certainty about their contribution value
- Wishes to avoid potential court proceedings in the future
Is a prenuptial agreement right for us?
There are a lot of factors around Binding Financial Agreements that can create a negative perspective. Sometimes, they solely protect an individual from potential losses, but more often, they provide certainty and clarity for both parties.
Considering long-term financial goals and having clear expectations early on in a relationship benefits many partnerships, and having a legal contract simply solidifies this. A prenup requires forethought and planning on behalf of both parties, but it also provides peace of mind and clarity.
If you are considering whether a prenuptial or postnuptial agreement is right for you and your significant other, get in touch with our friendly team. We can help you understand the benefits, potential risks, considerations and costs involved to ensure you make an informed decision.