Deciding to get married is an exciting and wonderful time. While we all hope for ‘happy ever after’, relationships do break down.
According to the Institute of Family Studies, in Australia, around 52,000 couples will end their marriages every year. Given this reality and the prospect of lengthy court battles which will see most couples spending somewhere between $50,000 – $100,000 in legal fees, a prenup agreement may be well worth considering.
What is a Prenuptial Agreement?
In Australia, a prenup is known as a Binding Financial Agreement (BFA). It is drafted at the beginning of a relationship and sets out how assets will be divided if the couple breaks up in the future. A BFA can be used for defacto relationships as well as marriages, according to Brisbane Family Law firm, KLM Solicitors.
When should you have a BFA in place?
Anyone in any financial position can set up a BFA. However, there are situations where a BFA is crucial to ensuring financial asset protection:
- If one party has more money, property or assets than the other party at the beginning of the relationship
- If you have a family business
- If there is the potential for you to receive a large inheritance sometime in the future
- If you have children you wish to protect from financial uncertainty
What does it involve?
The general premise of a prenup is that each party keeps the assets that they originally brought to the relationship and then any jointly acquired assets will be split 50/50.
However, you can ultimately decide how you want the split and as long as you both agree then you have a BFA. In Australia, a BFA is purely financial and you can’t add extra clauses to deal with child custody, etc.
Do you need a lawyer?
The short answer is yes, as a BFA must comply with the formalities that are set out in the Family Law Act in order for it to be legal and binding. Section 90G of the Act states that each party must have received their own independent legal advice in order to complete an enforceable BFA.
Can you actually rely on it?
The family court will generally try to uphold a BFA. However, if the court feels that one party signed the agreement under duress or that there has been some sort of fraud involved, then it may decide to set the agreement aside.
It may seem unromantic and even a bit pessimistic to be thinking about organising a BFA, particularly if you have a happy relationship currently. However, it’s really just a practical way of protecting yourself and your partner should things not turn out as planned. As Khloe Kardashian once said “Everybody needs a prenup. People are crazy…. You have to protect yourself. It doesn’t mean that you don’t love them.”