You’ve probably heard of prenups (slang for a ‘prenuptial agreement’) in pop culture and TV shows. A prenup is a legally binding contract created and signed by two people before they get hitched or enter into a de-facto relationship.
Prenups serve an important purpose – they detail what will happen to your finances and assets during your relationship and in the event of a separation or divorce. (They can also be made after marriage, in certain circumstances).
A note on prenups in Australia
In Australia, prenups are more commonly known as Binding Financial Agreements, or BFAs for short. Which – on second thought – kinda sounds like an award an actor would be nominated for. Congrats on the (potential) divorce, we guess?
Prenups may also be referred to as pre-nuptial agreements, post-nuptial agreements, cohabitation agreements, separation agreements or divorce agreements.
It’s confusing, we know. So for the sake of this guide, we’ll stick to the word ‘prenup’ for clarity.
Are prenups legal in Australia?
You bet they are. Prenups are enshrined in law under Section 90B of the Family Law Act 1975. However, the courts can ‘set a prenup aside’ if they believe that the agreement doesn’t comply with the requirements of the law, which invalidates the prenup. That’s court power for ya.
There are a number of reasons for an invalidated prenup, like if legal advice wasn’t sought or given prior to signing. To avoid future problems, both partners must obtain independent legal advice before signing, and the lawyers must sign an agreement to say that they provided this advice. Other reasons include if one party is found to have untruthfully disclosed their actual assets, or if the court believes that one partner was forced to sign the document. This is grounds for scandal and DRAMA! All the things we love to watch in a good legal TV show, are we right or are we right?! Just kidding. But, you know, the court will generally try to uphold the agreement. So yay for that.
Do I really need a prenup?
It depends on your situation, but generally, those entering de-facto relationships or marriages are advised to at least consider creating one. Many people believe that writing a prenup before settling down with a partner means that you’re testing fate and that the relationship is doomed from the start, but it’s actually quite a reasonable assurance to put into place and has the power to clarify many of life’s uncertainties within one written document.
When can a prenup be useful?
- You are in a de facto relationship and one partner is moving into their spouse’s home
- It’s your second marriage and you still have assets from your first marriage that you would like to give to your children in the future
- One partner has more property than the other
- You are protecting a future inheritance or a family business
- You would prefer to eliminate any uncertainty if the relationship ends and avoid going to court.
So, what happens when your spouse dies and you have a prenup?
A prenup not only protects couples who are getting divorced or separated but can also survive the death of a partner. This means that if a partner dies, the prenuptial agreement is still valid.
What about children?
If you’re unsure about whether you will have children, you should still mention this and how it will affect the property division. If you do happen to have children later in the relationship and this wasn’t mentioned, then the agreement will not be legally binding.
A prenup can provide child support, but only if the child has already been born and can be named, and exact details (like, how much money will be needed) are included in the agreement. Keep in mind that the terms of any financial agreement, (including a prenup) can be overruled by the Court if these terms are found to not be in the best interests of the child.
So, not only have we learnt that prenups have about 101 different names, but we’ve also learnt that they’re not just for couples who are ending relationships – they are also helpful documents to refer to if a spouse dies. (And so are legal Wills, of course).
In films and TV, prenups are often top-of-mind for spouses with big fortunes who are seeking to protect their own money in case of a future divorce. As we know, what we see on TV doesn’t always depict real life, and some legal dramas may or may not need to hire some legal advisors, just FYI (not naming names).
Prenups not your jam? Now might be a great time to start or update your Will, so you know that you’ve done everything you can to set up your loved ones and protect your assets in case the unexpected comes knocking.
Disclaimer: The content of this blog is intended to provide a general guide to the subject matter. This blog should not be relied upon as legal, financial, accounting or tax advice.