What are the key things anyone getting married in Australia needs to know before signing a prenup agreement
A prenuptial agreement is a private contract made by two people prior to them entering into a marriage. The prenup agreement outlines what is going to happen to the property and assets in the event of a relationship breakdown.
In Australia, a prenuptial agreement is legally known as a Binding Financial Agreement and requires both parties entering into the agreement to seek independent legal advice.
For many people, the idea of a prenup can be a little bit depressing and unromantic, however, for many others, it is a useful tool that has helped to make the separation and divorce process a lot easier.
Yet very few Australians actually sign prenup agreements.
Research from Canstar in Australia indicates only six per cent of married couples sign prenuptial agreements and 91 per cent said they had no prenup with their partner and three per cent were unsure if they did or not.
Canstar’s finance expert, Steve Mickenbecker, said Australian couples should be more concerned about protecting their assets.
“We can see that people are marrying later in life, meaning they have more assets that could need protecting if the relationship breaks down,” he said. But he added that “it’s worth considering that a prenuptial agreement may not necessarily produce a better outcome than a divorce settlement.”
However, before you sign a prenuptial agreement, it’s important to take a few things into consideration. In this piece, we’re going to provide you with some tips of the things to consider before signing a prenup from a legal perspective.
And the courts have taken a particular interest in the area recently in Australia, particularly regarding blended families and the need to take particular care over financial agreements entered into.
What should I do before signing a prenup?
Whether you’ve initiated the prenuptial agreement or have been asked to sign one, there are some things you should consider before making an official agreement like a binding prenuptial agreement.
It is important to ensure that those entering a prenup realize that they are important, legally binding documents and should be entered into with appropriate care. We spoke with family law solicitors Unified Lawyers to get an understanding of the key considerations anyone entering a prenup should consider.
1. Get legal advice
It is obvious from what has been said that legal advice should be obtained. It is important for both parties who may be entering into a prenuptial agreement to understand their rights and obligations from a legal perspective.
This is why it is a requirement for parties entering into these kinds of agreements to seek independent legal advice. This means that each person has to get legal advice from different lawyers to avoid any chances of persuasion or misinformation.
This allows each person to make an informed decision. Unless you’ve studied the law in great detail, you’re unlikely to be aware of all of your rights and responsibilities unless you seek legal advice.
Ensure you choose to work with a lawyer that is not only competent and experienced but also one that you feel comfortable with. You may need to ask them a variety of personal questions.
2. Fully disclose your assets and liabilities
To ensure a prenuptial agreement is valid and fair, the parties to a prenuptial agreement must disclose the full financial position. This means that they need to provide information regarding all of their financial resources, property, and assets.
If all of this information has not been provided, an agreement could be considered invalid and that it has been obtained fraudulently, because each party may not have bene able to make a fully informed decision.
If a party does not disclose all assets or attempts to hide them, it can also provide grounds for a prenuptial agreement to be challenged if the relationship does end and the partner has become aware of these assets.
3. Understand what a prenup can include
A prenuptial agreement can cover a wide variety of matters, not just what will happen to assets and property. It can also cover other arrangements like who will be responsible for certain debts and liabilities, as well as spousal maintenance arrangements.
Some people are also not aware of what is considered to be an asset or property. Money, investments, houses, properties, real estate, businesses, inheritances, and superannuation are all considered to be property that could be included in a prenuptial agreement.
4. Think about potential future circumstances
It’s important to create an agreement that takes into consideration a variety of scenarios. If an agreement only focuses on the here and now, it could end up being ruled as invalid because it doesn’t make any future allowances.
One of the future circumstances that provisions should be considered for are children. A significant material change, as in a change to the circumstances of the relationship, that the prenuptial agreement doesn’t allow for can make the agreement invalid.
So, if there is a possibility that you and your partner may have children, they need to be considered in the prenuptial agreement.
5. Consider possible inheritances
Another future scenario many people forget about is the possibility of receiving an inheritance in the future.
When a couple separates and goes through a property settlement process, an inheritance received by one member of the couple may be included in the marital asset pool that is up for division.
There are some circumstances where an inheritance may not end up being included in the marital asset property pool, for instance, if there are very clear instructions regarding how the inheritance is to be used from the person leaving the inheritance. However, often it can be included.
6. Don’t leave it too late to create a prenup
Creating a prenuptial agreement should never be rushed. It takes time to do it right. A lot of information needs to be considered and there needs to be ample time for both parties to receive advice and to think about what they would like to do.
If you’re considering asking your soon to be spouse to sign a prenup, you should discuss it with them well in advance of the wedding. If you’ve been asked to sign one and it’s very close to the wedding, you should seek legal advice to ensure the agreement is fair.
When people are asked to sign a prenup close to the wedding, it can make them feel more pressure to sign the agreement, which could lead to the agreement being ruled as invalid due to signing under duress.
7. Make sure all criteria of a prenup have been met
We’ve mentioned a few actions that can make a prenup invalid. There are also some basic legal criteria that must be met for a prenup to be valid, these include:
· The agreement must be in writing and signed by both parties;
· Each person signing the agreement must be a legal adult;
· Each person needs to have received independent legal advice; and
· The lawyer for each person must sign a statement confirming that they have provided advice regarding the agreement.
Although talking about prenups with your partner may seem clinical and unemotional, if approached correctly it can be discussed openly with your partner in a manner that is grounded in the seeking of consensus over the future for both of you – and financial security and independence is part of that discussion.
