What are pre-nuptial agreements and what do they cover?
What people sometimes refer to as a pre-nup or a pre-nuptial agreement is actually a type of financial agreement. They are sometimes also called binding financial agreements or BFAs.
Simply put these are formal legal documents between parties in a marriage or de facto relationship recording their agreement on what will happen with their property and finances in the unfortunate event that their marriage or relationship breaks down.
Generally pre-nuptial are created before a couple marries, or enters into a de facto relationship, but they can be created or amended during a marriage or de facto relationship and also following the breakdown of a marriage or de facto relationship.
Pre-nuptial agreements cover:
- how a couple's assets and money will be divided following a relationship break down
- financial support (maintenance) of either party (during the marriage and/or after divorce)
- other issues particular to your circumstances and relationship.
Pre-nuptial agreements aren’t always binding
Many people worry that pre-nuptial agreements are not binding and will be set aside during a property settlement by the Court in the event of a relationship breakdown.
This can happen if the pre-nuptial agreements are not correctly drawn up and detailed enough. Financial agreements have legal requirements which are strictly interpreted. Any failure to meet even the smallest of them may lead to a total failure of an agreement, with serious financial consequences.
Done properly pre-nuptial agreements are binding, so unless you have appropriate legal training and expertise, it is extremely unwise for you to prepare your own pre-nuptial or other financial agreement.
For instance, a hand written letter, even if signed by both parties, will not be accepted as a legally binding financial agreement by the Courts.
Another reason pre-nuptial agreements fail is when one party has been subject to “undue influence” or “unconscionable conduct” by the other party in order to get them to sign the agreement, for instance threatening to cancel the wedding if an agreement is not signed.
These cases are especially common when the life circumstances of the two people are different, where one partner is reliant on the other for a visa, or for financial support for instance creating a power imbalance in the relationship.
Who should make a pre-nuptial agreement?
Sadly, today there are more and more disputes and court cases over property, assets and finances after relationships end. These disputes and court cases can be financially draining and emotionally devastating.
A formal pre-nuptial agreement can help everyone to know exactly where they stand and to gain peace of mind, it can be helpful to think of it as a type of insurance.
Where a pre-nuptial agreement exists, then large legal bills and upsets are averted because all involved know what will happen and have agreed in advance what is fair. All that remains is to carry out the terms of the financial agreement.
Generally you would be well advised to consider a financial agreement if:
- you are entering into a marriage or de facto relationship and wish to avoid high legal costs and the unpleasantness involved with a possible future dispute
- you are entering into a second or subsequent marriage or de facto relationship
- you are entering into a marriage or relationship where there is an inequality of assets and finances
- your family members are concerned about your position, or the future impact of your plans upon your financial position.
How can Preston Law help?
Preston Law can discuss with you and your partner the best way to structure your pre-nuptial agreement to ensure both parties are fully protected and then prepare and execute the agreement for you.
If you are being asked to sign a pre-nuptial or other financial agreement is important you obtain independent legal advice to understand the implications of property.