Do we have Pre-Nups in Australia?
In Australia parties can enter into an agreement called a Binding Financial Agreement. Because these agreements can be entered into prior to a relationship, or prior to marriage, they are colloquially referred to as ‘pre-nups’.
What is a Binding Financial Agreement?
A Binding Financial Agreement is a written agreement between two people in a life relationship, which sets out how they will divide their assets and liabilities at the end of their relationship.
When can a Binding Financial Agreement or pre-nup be used?
A Binding Financial Agreement can be entered into either:
- Before the relationship starts (the term “pre-nup” is commonly used to describe these types of agreements);
- During the relationship; or
- After the relationship is over.
I have heard that a pre-nup is not binding, is that true?
The Family Law Act sets out the requirements that must be complied with in order for the Agreement to be a binding agreement. Like most agreements, if the agreement is not done properly and does not comply with the legislation, there is a risk that it will not be binding. You can ensure that the agreement is binding by obtaining appropriate advice from an experienced family lawyer when considering whether to enter into this type of agreement.
Why would I enter into a binding financial agreement?
People who usually enter into a Binding Financial Agreement prior to a relationship or prior to a marriage include people who:
- Have greater assets than their new partner, and would like to protect themselves from the risk that their share of those assets may be reduced in the event of a separation;
- Have children from a previous relationship, and would like their assets to go to their children rather than their new partner, in the event of a separation;
- Have been through a family separation previously and understand the cost and time associated with a family law dispute and wish to avoid going through this again;
- Have had family or friends who have had a family law separation and would like to avoid going through the court system.
If I have a simple agreement, will it cost less?
While a simpler agreement will involve less time to draft and formalise than a complex agreement, a Binding Financial Agreement is a detailed agreement and requires each party to the agreement to:
- fully disclose their financial position;
- exchange documents evidencing their financial position;
- Agree to the terms of the Agreement;
- Obtain independent legal advice prior to signing the Agreement.
The above requirements apply regardless of whether the terms of the agreement are simple or complex. Collating the financial material to undertake the disclosure process can add to the time and cost of your agreement.
Once I get an agreement, does it need to be updated?
Your agreement should be reviewed and updated at times when your relationship changes. For example, if you and your partner buy a property together and your agreement said that you would keep your finances separate, it is important to ensure that you obtain legal assistance to update your agreement, so that it remains enforceable.
If your circumstances change and you do not update your agreement, you face the risk of having your agreement challenged.
Can my partner and I both see the same lawyer if we are in agreement?
You and your partner will need to obtain independent legal advice from separate lawyers. Each lawyer will advise each party separately about the agreement, and will provide a statement confirming the advice has been provided.
What are the costs of a Binding Financial agreement?
The costs may vary depending on the terms of the agreement, the complexity or otherwise of the agreement and who is preparing the agreement. You should make enquiries about the costs before deciding whether to proceed with this type of agreement. In any event, the cost of the agreement will be much less than the cost of a litigated dispute through the family court system.
Should you have any questions, please contact the Family Law team at Watkins Tapsell. To view other blogs we have written, please visit www.watkinstapsell.com.au