Everyone enters their life relationships with a ‘whole lotta love’ and the best of intentions. However, life is unpredictable and presents many obstacles which can result in a turn in our relationships. As cynical and unromantic as this sounds, the reality is that between 30% and 40% of marriages and de facto relationships end in separation.
As a Family Law lawyer, I see how stressful and costly separation can be if parties do not agree on how to divide assets. A way to avoid disputes about property in the event of separation, is to sign a Binding Financial Agreement with your partner. This type of agreement is more commonly referred to as a Pre Nup. Provided a Pre Nup is prepared well, it will be binding.
The Terminator is a good example of how costly a separation can be without a Pre Nup. As Arnold Schwarzenegger and his ex-wife, Maria Shriver, did not have a Pre Nup under Californian Law, the assets of the marriage, reportedly valued at about $400million dollars, would have to be split equally. In addition, Maria would have been entitled to claim alimony, known as ‘spouse maintenance’ in Australia.
This result would have occurred regardless of the assets Arnie owned at the beginning of their relationship. While Australian Family Law is somewhat different to Californian Law, without a Pre Nup, control of the division of your assets at separation is taken out of your hands and is subject to the decision of a Judge.
It is believed that the Terminator and his wife settled their property matters without a Pre Nup. Arnie relinquished a small fortune in order to reach an early resolution. By doing so, he and Maria substantially reduced their legal costs, and the uncertainty and stress of their property dispute, following the emotional turmoil of Arnie’s affair with his housekeeper and the subsequent separation.
Most of us take out insurance for unforeseen and unlikely circumstances such as disability, illness, injury and theft. We don’t actually expect these things to happen, just as I’m sure Arnie and Maria did not expect their 25 year marriage to end in separation. A Pre Nup is like any other insurance policy – it is protection against those ‘what if’ circumstances.
A Pre Nup is not just about protecting your own assets. It can also be about protecting:
• your business partner’s interest in a business
• loans, gifts or inheritances from parents
• the rights and entitlements of your children from a previous relationship and, most importantly
• you and your partner from difficult and expensive disputes about property division.
A Pre Nup can be signed up before, or during, your relationship. The hardest part about doing a Pre Nup is bringing it up with your partner. It is one of those uncomfortable topics we try to avoid, like preparing our Wills. Like a Will, it is also something you just have to do. Yes, it may be uncomfortable, but it can avoid heart ache in the long run and at the end of the day, if you can’t talk to your partner about touchy or difficult issues, it does not bode well for your relationship. (A good way to approach the topic is to consider a Pre Nup to be a positive step in your relationship – a great way to learn about expectations, dreams and hopes).
As any relationship counsellor will tell you, communication is the key to a healthy relationship and a Pre Nup is a great way of establishing that communication early. A Pre Nup can also be a way to move forward with your relationship as it can eliminate doubts some people may have about their partner’s intentions.
For further information, contact the Family Law Team