What is a prenup?
A prenuptial agreement is an Americanism for what is called a Financial Agreement in Australia. In fact, it is a reference to only one type of Financial Agreement available in Australia, the one entered into when contemplating marriage.
In other words, a prenuptial agreement in Australia is a Financial Agreement which includes a condition that part (or all) of the agreement does not come into force until the parties to it are married.
What is a Financial Agreement?
In a generalised sense, a Financial Agreement, or prenup, is a formal, legal document, which dictates what each person will take and/or receive in the event they separate.
What they take can include assets, liabilities, superannuation, financial resources – these together would normally be classified as a property settlement – and it can also include any cash payments that one person makes to the other – this is normally called spousal maintenance in Australia, or, in keeping with the Americanism, alimony.
A Financial Agreement can be prepared between:
- A couple who intend to take steps to make their relationship a “defacto” relationship – like a prenuptial agreement for defactos, a “predefacto” agreement;
- People who are currently in a defacto relationship or a marriage;
- People who have separated from a defacto relationship or a marriage;
- People who are divorced; and
- Any other person and the couple in any of the above categories.
The most common type of prenup we prepare is one which identifies what Person A brought into the relationship, and what Person B brought into the relationship. The agreement states they keep all of those items in the event of separation, and if there are any ‘joint’ purchases made during the
relationship, the parties divide that equally or in the ratio which they contributed to its purchase.
Of course, there are many different variations in the world, each individual Prenuptial Agreement or Financial Agreement is as unique as the people involved in them. I’ve also seen Financial Agreements being used to protect financial gifts or loans (from parents to children), such as deposits for homes and financing businesses etc.
These contributions can be protected in a prenup or Financial Agreement – even if the prenup or Financial Agreement only deals with that one particular point – so that any money given is first returned to the parents, and the parties then divide up what’s left.
Prenup pros and cons
Some of the pros of prenups are:
- They are the only form of ‘insurance’ you can take out for the breakdown of your relationship;
- They are much easier to prepare while a couple are still in love and getting along, without any hostility (or at least less than when they are separated!);
- They are often far cheaper to prepare than compared to the costs of litigation in the event of separation;
- They can carefully and appropriately be structured and tailored to your individual situation, and can include many things you could not reasonably expect out of a Court;
- By having one, if the unfortunate situation does arise and the relationship ends, the stress and uncertainty of a property settlement, or financial support, does not add to the stress and worry already felt at the end of a relationship.
Some of the cons of a prenup are:
- They can be expensive to obtain and prepare properly and professionally;
- That they are used as a bartering chip for couples with a large wealth and power imbalance – the “if you don’t sign this we’re not getting married and it’s over” type people use it to coerce more vulnerable partners. However, there are cases recently were this type of pressure has been such that the prenup was actually set aside and unenforceable;
- They can never be a 100% guarantee that they will be binding and not set aside by a Court if they are challenged. No lawyer (good lawyer at least) would ever give that type of guarantee. There are situations, facts, eventualities of life which can never be predicted, and these can also be ones where a Judge thinks that a prenup or Financial Agreement should not be binding on the parties to them – even if it’s properly drafted.
They are, however, the next best thing to a guarantee.
Get Prenuptial Agreement advice
Our Brisbane family lawyers can provide expert legal advice regarding prenups and financial agreements. Contact us today for a private consultation before signing any legal documentation, or to discuss any existing prenuptial agreements.