Whilst the prenup used to be mainly used by the rich and powerful, it is fast becoming popular and relatively standard with average working people. A prenup can help people to protect their assets after a divorce and can help to safeguard the interests of both parties in the event of a relationship breakdown. So what do you need to know about them and do you need to get one?
What is a prenup?
A prenup, or a prenuptial agreement is a contract between couples who are looking to get married or establish a de facto relationship. A prenup most often is concerned with financial matters and assets but can also relate to other relevant matters such as spousal maintenance. In Australia, prenuptial agreements are known as binding financial agreements. They are designed to look at developing agreements about how assets should be divided and managed in the event of a relationship breakdown. The binding financial agreement is basically designed to preclude the family court from deciding how assets are divided. The contract is usually entered into before the start of a marriage or a de facto arrangement but can technically be entered into at any point in time.
How is it done in Australia?
The way a prenup works differs a little bit from country to country. In Australia, binding financial agreements must be delivered in writing and signed and agreed upon by both parties. Both partners must receive separate advise, which means two lawyers are required and partners should make sure they understand the implications of the agreement before they sign.
What are the benefits?
A prenup can provide certainty between you and your partner and can give you the peace of mind of knowing that the division of your assets has been set out in case of a future relationship breakdown. By deciding ahead of time it ensures that the court cannot interfere later and that the way you have chosen to divide your assets can not be changed later on unless you both agree to amend and mean the agreement. Binding financial agreements give people security and mean that they can get on with making decisions with certainty. The agreements are confidential that should a relationship end, the division of assets and way that your breakup is managed is not heard in public court and no one but your lawyer will be privy to the information. A prenup can save you a lot of time and money later on as it can save you having to go to court to manage disputes. Disputes over how assets should be divided can easily take up a lot of time in the courtroom and could attract a lot of lawyers fees, agreeing ahead of time will ensure that time and costs are kept to a minimum.
Are there drawbacks?
Sometimes binding financial agreements can be used improperly when someone in the relationships has more control and uses it as a method of exerting financial control over their partner. Even if they are unfair or do not provide favourable terms, binding financial agreements are enforceable and could mean that one partner gets a bad deal. Additionally, not everyone will think that they are a good idea or respond positively to them. Some partners will view them as a lack of trust and good faith in the relationship and will respond negatively to being asked to sign an agreement. People should carefully consider the implications for their relationship before asking their partner to enter into one as it might attract a strong negative reaction from the prospective spouse.