Understanding Prenuptial Agreements: Protecting Your Assets in the Event of a Relationship Breakdown
Couples often ask what is a prenup and why they would need it. In marriage, love and finances should not be intertwined, and each partner has the right to safeguard their assets in case of divorce. Putting a prenup in place is a simple risk management strategy for your life. It is pretty relevant and applicable in NSW, Australia. If you need a prenup drafted, contact the James & Jaramillo team to help with your needs.
What Is a Prenup
In A Nutshell
Many spouses or prospective ones often ask the question: What is a prenup? Also known as a Binding Financial Agreement (BFA), a prenuptial agreement is a legally binding financial contract made by partners in a marriage or de facto relationship.
BFA typically lists all the assets, debts, or money each spouse owns. It also gives specific directives on how to deal with them and what obligations they have to one another in case of a divorce.
As such, whether the marriage is governed under civil law or a religious system, a prenuptial agreement is often drafted to provide the couple economic security during the marriage.
Is It Legally Binding in NSW, Australia
The Legal Requirements of a Prenuptial Agreement in NSW
Now that you know what is a prenup, the next step should be to understand the conditions that make it legally binding. A prenuptial agreement in Australia is legally binding if:
- They are written under Section 90B of the Family Law Act 1975.
- They are correctly dated.
- They are written and signed by the parties.
- Each party must have signed the prenup voluntarily.
- Each of the parties should disclose their financial assets, property, or debts.
- Each party has attached a certificate of independent advice agreement.
- Each spousal party must have received legal advice from their lawyers before signing the contract.
Who Requires a Prenup
Understanding the Legal Requirements for a Prenuptial Agreement
Contrary to common myths that prenuptial agreements are only for the rich and famous, most legally married couples qualify. You might need one if:
- You have children from a different marriage. If you have kids whom you may want to inherit your assets, a prenup will protect your property and assets from other family members, safeguarding them for your children in case of a divorce.
- You have a fortune. If you have some property and money to your name, drafting a prenup before getting married will offer you peace of mind.
- You have a business. A prenup may help protect the other partners if you are a company co-owner.
Do not hesitate to schedule a free consultation with us for more information. (02) 8005 3075
Advantages & Disadvantages Of Prenup
What Are They?
Here are a few benefits of getting a prenup.
- They are secure. A prenup allows spouses to live peacefully and not spend their entire marriage worrying about their future plans in case of an event of separation or divorce.
- They offer certainty. It allows spouses to set specific directives on how they want their assets to be divided.
- They are suitable for estate planning. If both spouses have stakes in estates and significant assets, the prenuptial agreement contains plans to address them in case of separation.
- They are done in private. Marriage partners avoid exposing their lives to the public. As such, when drawing a premarital agreement, only the parties and their lawyers are involved.
While there are many benefits to signing a prenuptial agreement, there are a few cons, including:
- They can cause distrust. Some spouses, especially those without assets or those that do not offer non-financial contributions, may feel their partners do not trust them with their investments.
- They prevent the right to spousal inheritance. If stated, the existence of a prenuptial agreement results in the refusal of spousal support or inheritance.
- They do not always hold up in court. Since prenuptial agreements are drafted and signed outside the court, they may not be legally binding.
Are They Always Enforceable?
Fairness and Voluntary Signing in Prenups
Many people also wonder whether prenuptial agreements are always enforceable. The simple answer is no. This is because:
- Some prenups do not portray the equitable distribution of property between the divorced parties.
- Some prenups lack the disclosure agreement. If a party had not fully disclosed their asset and financial value, the prenup might not hold up in family court.
- The signatories may not have voluntarily signed the prenups, which is subject to harassment and coercion.
In the case of Thorne v Kennedy , it was determined that a prenup is not valid when signed by both parties, as undue influence and unconscionable conduct can take place.
In other words, instances where the terms of a prenup are ‘forced’ on one partner by the other before marriage. It’s crucial to ensure that agreements, especially those about money and property, are made fairly and without any pressure or force.
What Can Happen If You Don’t Have One
The Consequences of Not Having a Prenup
Suppose you get married and divorce your partner without a prenuptial agreement. The issue can be handled in court under the Family Law Act.
However, since marriage is considered a legally binding contract with automatic rights for each spouse, there is a chance that in the absence of a prenup, a spouse has a right to:
- Incur debts acquired by their partner during marriage and are required to help pay off the debts.
- Share in property management and control.
- Have a share of the property acquired during your marriage.
How To Get a Good Prenup
Tips for Creating a Strong Agreement
As divorces and remarriages have become more prevalent in Australia, the state permits spouses to sign a prenup to protect their premarital assets.
However, because not all prenuptial agreements hold up in court, it is a requirement that any partners looking to get married and sign a prenup should obtain independent legal advice from their lawyers.
As such, the prenuptial agreements should contain the two signatories of the spouses and their lawyers. The prenups should also be legally sound, clear, understandable, lawfully binding, and valid in court.
How To Draft One
Having a prenup in place before getting married ensures you address vital financial and personal issues that could cause wrangles in the future.
As such, here are a few guidelines for drafting a successful prenup.
- Draft the contract at least a month before the wedding or months earlier. This helps reduce the risk of having the prenup not enforceable because you blindsided your spouse.
- Have separate lawyers. Receive independent legal advice from an experienced lawyer, as this can help you make the right decision before you sign the agreement.
- Fully disclose the assets or debts in the contract to avoid legal repercussions in the future.
- Ensure the provisions set in the contract are fair to your spouse.
- Regularly update the prenup agreement if any changes happen during your marriage.
Call JJ Lawyers If You Need Help With Your Prenup
When a relationship breaks, both parties may resolve to divide their assets, and that is where the prenups come in. Having our family lawyers Sydney by your side is crucial to acquire the best litigation during a relationship breakdown. At James & Jaramillo, we support and fight for your best interests.
For more comprehensive breakdowns, see our dedicated law blog. We unpack a vast range of pertinent criminal law, family law, traffic law & civil rights law topics such as what to do when your ‘Ex Husband Is Delaying Property Settlement‘, ‘, ‘What Is Affray‘, & ‘How Long Does A Police Check Last In NSW.’