What Is Prenuptial Agreement in Australia | Legal Guide

What is Prenuptial Agreement? 

What is prenuptial agreement going to do for your marriage? It might seem unromantic to discuss finances before your big day, especially when you’re deeply in love and planning your dream wedding. Bringing up a prenuptial agreement may feel like disrupting marriage plans, making the conversation awkward. However, a healthy relationship recognises the importance of discussing finances openly and honestly. 

But what is prenuptial agreement exactly? In Australia a prenuptial agreement is known as a Binding Financial Agreement. It is a written contract made before entering into a de facto relationship or marriage, outlining how a couple’s assets and finances will be handled if their relationship or marriage ends. It can cover property division, financial support (spousal maintenance), and other related matters, both before marriage and after a divorce. 

Its primary purpose is to protect assets, define financial responsibilities, and provide certainty for both partners. A prenuptial agreement is discussed and signed before marriage, but couples who are already married can still enter into a binding financial agreement. This agreement serves the same purpose as a prenup but is established after the marriage. 

Understanding prenuptial agreements is particularly important for those with significant assets, business interests, or children from previous relationships. It helps to establish expectations and prevent future disputes. 

What is Included in a Prenuptial Agreement? 

A well-drafted prenuptial agreement provides a framework for managing financial matters during the marriage and in the event of its dissolution. 

The prenuptial agreement typically addresses the following: 

Asset division 

A prenup can specify how premarital assets, inheritances, and future earnings will be divided, so you retain control over your individual assets that were acquired before the marriage. It also clarifies how assets acquired during the marriage will be managed, especially if one partner is the primary earner or has substantial financial investments.  

Premarital assets can include inheritances, business ownership, real estate, retirement funds, investments, intellectual property, and even digital assets. They also cover how debts, future earnings, and shared items (like vehicles and pets) will be handled, including any future windfalls. 

Spousal support 

The agreement can also cover spousal maintenance, if it will be paid, how much, and for how long. The prenup specifies under what circumstances spousal support applies, such as if one partner sacrifices their career to raise children, or if one party has a medical condition that requires long-term financial assistance. 

Debt allocation 

A prenup also includes how premarital and marital debts will be handled, protecting you from being held liable for your partner’s financial obligations. This is useful in cases where one partner enters the marriage with significant student loans, credit card debt, or business liabilities. A prenup dictates that each of you is responsible for your individual debts and that shared debts are clearly defined. 

Property ownership 

Your prenup clarifies if certain properties will remain separate or be considered marital assets. This is important for couples who jointly invest in property or if one partner already owns multiple properties. By specifying ownership rights, you prevent lengthy legal battles over real estate in case of divorce. 

Inheritance rights 

A prenup also safeguards inheritances intended for children from previous relationships are preserved and will not be subjected to division in a divorce. It addresses financial gifts from family members and business inheritances that should remain within a particular family lineage. This provision ensures that wealth is passed down as intended. 

What is Not Included in a Prenuptial Agreement? 

While a prenup covers financial matters, it cannot dictate certain legal or personal issues, including: 

Child custody and support 

Courts determine custody and child support arrangements based on the best interests of the child at the time of separation, not based on a prenup. Even if a prenup outlines certain custody expectations for you or your partner, the courts will assess what is best for the child, and considers factors such as living arrangements, emotional well-being, and financial stability. 

Unreasonable personal conduct clauses 

Clauses that impose behavioural conditions, such as weight maintenance or household chores, are unenforceable. Couples may wish to include provisions about lifestyle habits or personal expectations, but the courts will not uphold agreements that dictate personal behaviour unrelated to financial matters. Any clauses that are deemed unfair or unreasonable will be disregarded. 

Waivers of legal rights 

Some provisions that attempt to waive fundamental rights, such as the right to seek spousal maintenance in all circumstances, may not be enforceable. Courts may override clauses that leave one party in significant financial hardship or attempt to circumvent legal obligations. 

Understanding these limitations is important to avoid drafting provisions that may later be deemed invalid. It’s essential to focus on financial fairness and clarity rather than attempting to dictate non-financial aspects of the relationship.  

How Does a Prenuptial Agreement Work? 

According to the Federal Circuit and Family Court of Australia (FCFCOA), it is mandatory to get independent legal advice before you enter into a financial agreement. Any hidden assets or misrepresentations may render your prenup invalid, so it is important to have your lawyers go through the process to maintain honesty and transparency. Your lawyer will also need to sign the agreement.  

The family court is not involved in drafting the prenup, but they will not uphold the terms if it does not meet the requirements of the Family Law Act 1975. A well-drafted prenup has to be fair and reasonable. If one party is pressured into signing, or if there is a glaring imbalance in the terms, a court may later set it aside. To avoid disputes, both parties should approach the agreement with open communication. 

The process of creating a prenuptial agreement typically involves the following steps: 

Step 1: Negotiation 

Both parties discuss and negotiate the terms of the agreement. This stage often involves multiple discussions so that each partner’s concerns and expectations are addressed. It may include financial planning, identifying priorities, and consulting legal professionals. 

Step 2: Full Financial Disclosure 

Both parties must fully disclose their assets and liabilities for transparency and fairness. 

Step 3: First Agreement Draft 

A family law solicitor drafts a formal document outlining the agreed terms. The document should be carefully written to ensure compliance with legal requirements and fairness. 

Step 4: Review and Revisions 

After legal review, the agreement may be revised for clarity and fairness. Both parties should be comfortable with the final terms before proceeding. 

Step 5: Signing the Agreement 

The prenup must be signed before the marriage to be legally binding. In some cases, it is recommended that the signing occurs well in advance to avoid any claims of last-minute pressure or duress. 

What are Prenuptial Agreement Pros and Cons? 

You and your partner are deeply in love, planning your future together. You’ve talked about your dreams, your values, even your long-term goals. But when the topic of finances and a prenuptial agreement comes up, the conversation takes an unexpected turn. 

Your partner is hurt, wondering why you would even consider such a thing. You feel stuck between protecting your financial future and reassuring them that your love isn’t conditional. Prenuptial agreements come with both benefits and drawbacks, which must be carefully considered. 

Pros: 

• Protection of premarital assets: Your prenup safeguards assets you owned before marriage, so they remain separate property. It preserves financial independence and long-term security, so you retain what you brought into the marriage. 
• Clarity and predictability: Your prenup establishes clear financial expectations from the outset. This transparency fosters open communication and reduces stress related to finances. 
• Minimises conflict and litigation: By predefining asset division and financial responsibilities, prenups reduce the likelihood of costly and emotionally draining legal battles in case of separation. 
• Focus on the relationship: Addressing financial matters upfront allows you to enter the marriage with a sense of security and mutual understanding, so you focus on building a strong relationship without worrying about potential financial disputes. 
• Beneficial in specific circumstances: Prenups are especially valuable in second marriages by protecting assets for children from a previous relationship. It also benefits marriages with larger wealth disparities, or for business, so the money is shielded from potential entanglement in a divorce. 
• Potential for growth and change: While often seen as static, prenups are designed to accommodate future changes in circumstances. Regular reviews and updates make the agreement relevant while reflecting your evolving needs with your partner. 

Cons: 

• Difficult and emotionally charged conversations: Discussing a prenup may be uncomfortable and emotionally challenging, which leads to misunderstandings or hurt feelings.  
• Perceived as unromantic or shows lack of trust: Your partner might perceive the request for a prenup as a sign of distrust or a lack of faith in the marriage’s longevity.  
• Potential for Future Disputes: If not carefully drafted or regularly reviewed, a prenup becomes outdated. Engaging experienced legal counsel and incorporating regular review clauses are critical to mitigating the risk of future disputes. 
• Legal Costs & Complexity: Creating a legally sound and enforceable prenup gets expensive. However, this upfront investment potentially saves significant costs and emotional distress in the long run. 
• Enforceability Varies by Jurisdiction: What is valid in Australia may not be in another country.  
• Stigma & Misconceptions: Despite their increasing prevalence, prenups still carry a stigma and are often misunderstood. 

What is the Use of Prenuptial Agreement When You Get Divorced? 

A prenuptial agreement may still be challenged in Court. If the agreement is properly drafted and both parties entered into it voluntarily with full financial disclosure and the required legal advice, it is likely to be upheld. 

However, a prenup is challenged under certain circumstances: If one party was pressured into signing, did not receive independent legal advice, or if the agreement is deemed unconscionable (when it’s extremely unfair to one party), a court may set aside or modify its terms. Additionally, life changes such as the birth of children or drastic shifts in financial circumstances, may impact the enforceability of certain clauses. 

The best way to guarantee a prenup holds up in court is to have it drafted by a qualified family lawyer, with clear, reasonable, and balanced terms that protect both parties. 

How Much Does a Prenup Cost in Australia? 

The cost of a prenuptial agreement varies widely depending on several factors, including: 

• Complexity of Assets: More assets or business interests typically require more detailed agreements, increasing costs. 
• Legal Fees: Solicitors may charge a fixed fee or an hourly rate, depending on the agreement’s complexity.  
• Negotiation Time: If extensive back-and-forth discussions are needed to finalise the terms, legal costs may rise. 
• If the Agreement is Contested: If one party disputes the terms during drafting or later challenges the agreement in court, legal expenses will escalate. 

Based on the factors above, drafting and negotiation of your prenup could cost around $5,000 to $10,000. To get an accurate estimate, talk to your family lawyer to help you assess your specific situation and provide guidance on expected costs. 

Before You Say ‘I Do’ 

A prenuptial agreement is a valuable tool in protecting assets, providing financial clarity, and reducing future conflicts. However, it requires careful consideration and open communication between partners. 

Before signing a prenup, it is mandatory to seek independent legal advice to ensure the agreement is fair, legally binding, and suited to your needs. 

If you are considering a prenuptial agreement, contact us, we will guide you through the process and ensure your financial interests are safeguarded.