Is a prenup worth the money?

A prenuptial agreement, colloquially known as a prenup is also known as a Binding Financial Agreement (BFA) under the Family Law Act 1975 (Cth). A prenuptial BFA is drafted at the beginning of the relationship to set out how the couple would split their assets if they later separated. Such an agreement is recommended in several circumstances:

Why consider a prenup?

1. Wealth Protection: If one party has significantly more assets or wealth than the other at the beginning of the relationship, a BFA can protect these assets in the event of a relationship breakdown.
2. Inheritance: If one party is likely to receive a substantial inheritance, a BFA can ensure that this inheritance remains separate from the relationship assets.
3. Business Ownership: If one party owns a business, a BFA can protect the business from being divided or disrupted in the event of a relationship breakdown.
4. Second or Subsequent Marriages: For those entering into a second or subsequent marriage, particularly where there are children from previous relationships, a BFA can ensure that certain assets are preserved for those children.
5. Debt Protection: If one party has a significant debt, a BFA can protect the other party from being responsible for this debt in the event of a relationship breakdown.
6. Certainty: A BFA can provide certainty and clarity about how assets and liabilities will be divided in the event of a relationship breakdown, potentially reducing conflict and legal costs.

What is a Binding Financial Agreement (BFA)?

However, it’s important to note BFA must be entered into voluntarily and with full disclosure of all relevant financial information (including earnings, assets, and debts). Both parties must obtain independent legal advice before entering into a BFA. The court retains the power to set aside a BFA if it is not just and equitable if it was made under duress, unconscionable conduct, or if certain legislative requirements are not met.

In Australia, a BFA can be entered into before marriage, during marriage, and after marriage. These agreements can also be made by de facto and same-sex couples.

Prenups can cost between $2,000 and $10,000 to draft, depending on their complexity and the specific requirements of the parties.

Are they worth the money?

A BFA can save you from the expense of fighting out your property settlement in court. The key objective of a BFA is to avoid parties needing to commence proceedings in the Federal Circuit and Family Court of Australia.

If you are contemplating marriage or a de facto relationship and you have significantly more assets than your partner, then it would be in your best interests to protect these assets and enter into a binding financial agreement. Even if your assets are relatively equal, you should consider a BFA so that if you break up, you have a legally binding document that sets out your agreement. It avoids disputes and importantly, it will save significant costs for both of you.

Can a BFA be overturned?

BFAs in Australia must comply with the strict requirements of the Family Law Act 1975 (Cth). Each party must seek independent legal advice and have their solicitor sign a certificate of advice. If a BFA does not meet all legal requirements, then, yes, it can be overturned. A BFA can also be overturned if it is deemed ‘unfair’.

For further information, or if you would like to seek advice about entering a binding financial agreement, contact Croy Legal’s family law team on 1300 123 876 or email us [email protected]