Although no couple gets married expecting a divorce, it is crucial to consider your financial future. According to the Australian Bureau of Statistics, there were 48,700 divorces granted in Australia in 2023, so it is not surprising that prenuptial agreements (prenups), once seen as a bad omen, are now considered a sensible risk precaution.
What is a Prenup?
Having a prenuptial agreement, also referred to as a prenup, is a wise method to safeguard your future and provide certainty on what will happen to finances and assets in the event of a divorce or relationship breakdown. A prenup is a legal agreement made between two people and is entered into before marriage. It provides details on how assets, finances and liabilities will be divided up should their relationship end. This can also extend to future property obtained after the prenuptial agreement was signed by the parties. The prenup can be used in place of a separation agreement without the need of further agreement upon separation.
For further information on prenups, read Canstar’s in-depth guide on the benefits and disadvantages of prenuptial agreements.
Requirements for an Effective Prenuptial Agreement
In Australia, section 90B of the Family Law Act recognises these agreements as legally binding documents.
For a prenuptial agreement to be upheld by a court, the agreement needs to have been signed by both parties and each party needs to have received independent legal advice about the effect of the agreement on their rights.
What Can a Prenup Protect?
It is well established that a prenup can protect your existing assets.
These include, but are not limited to:
- Wealth / income
- Superannuation
- Businesses
- Interest in trust property
- Inheritance
What About Future Assets and Property You Obtain After Marriage?
The short answer is yes, a prenup can protect these future assets and inheritances from becoming marital property and they can be deemed individual property that the party can retain post-separation. However, there are requirements to be met for this to be so. These requirements include:
- Agreement needs to identify and describe the future estate or inheritance in specific detail to ensure the agreement covers it.
- The agreement cannot cover assets that neither party anticipated when the agreement was signed.
Limitations of Prenuptial Agreements
Prenuptial agreements cannot be used to agree on matters in relation to children, such as custody arrangements.
If a prenuptial agreement would cause substantial injustice, the court is not required to follow it.
Prenuptial agreements can be challenged in court, causing a further source of litigation. This can occur if:
- The prenuptial agreement was created fraudulently or one of the parties entered into the agreement to defraud the other. It is important to ensure the prenuptial agreement is created legally and neither party is attempting to defraud the other.
- The circumstances of the parties have changed since they entered into the agreement such that it is impractical to carry out all or part of the agreement. This means it is important to review and update your prenuptial agreement every few years or when circumstances significantly change for one or both of the parties.
- One of the parties were coerced into the agreement. It is important to seek legal advice to ensure the prenuptial agreement being made, is right for you.
Summary
Prenuptial agreements can do more than just protect existing assets and property.
They can also protect assets and property obtained after the agreement is signed. Having a prenuptial agreement in place prior to separation can also ease some of the stress that a separation entails as you would have already pre-determined how finances and assets will be divided post-separation.
However, it is important to seek legal advice to ensure the agreement is valid and it reflects your interests.
Dettmann Phair Lawyers – Your Trusted and Experienced Legal Professionals
At Dettmann Phair Lawyers, our team has decades of experience reviewing and drafting prenuptial agreements.
Let us streamline your financial planning processes by providing expert guidance and support to ensure your prenuptial agreements are effective and align with your estate planning and asset protection objectives.
To explore your options, call one of our expert contract lawyers at Dettmann Phair Lawyers today on (02) 9412 4500 or complete our enquiry form online.
Author
About the Author
Vanessa Wang, a Senior Associate at Dettmann Phair Lawyers, has been with the firm for over a decade. With her extensive background in commercial law, Vanessa excels in managing commercial transactions and resolving disputes. Admitted as a solicitor in 2012, she offers practical solutions and expert advice. Vanessa's commitment to delivering clear, actionable insights makes her a trusted advisor for businesses dealing with commercial legal issues. Email: vwang@dettmanns.com Phone: 0294124500
