Recently we have had an increase in enquiries regarding pre-nups. As more clients finalise their property proceedings with their former partners, they ask the question “How can I avoid this next time?”
Can you have pre-nups in Australia and what do they do?
In Australia ‘pre-nups’ are referred to as Binding Financial Agreements (‘BFA’) and they are the most effective way to protect your assets when entering into a relationship. A BFA can be entered into:-
- Before you commence a de facto relationship;
- During a de facto relationship;
- Before you get married;
- During a marriage; and
- After separation or divorce.
A BFA allows parties to contract out of having their property settlement dealt with under the Family Law Act 1975 (the ‘Act’) and allows parties to set out how they would deal with their property in the event of a breakdown of the relationship. A BFA can deal with all property matters including superannuation and spousal maintenance. Each client’s situation differs depending on their circumstances; however, we typically see parties interested in ‘quarantining’ assets that they are bringing into the relationship or that they own in their sole name. The purpose of this to prevent them from being included in a property pool for division if the relationship breaks down.
Parties are often interested in entering into BFA’s when they have significant asset pools, businesses, or competing family members who are wanting to protect an inheritance.
When is BFA appropriate?
The circumstances of your relationship will be examined by your lawyer to determine the appropriateness of a BFA in your case. Some things that will be relevant include:-
- Whether you intend to have children and whether either parties earning capacity will be affected by the birth of those children and the roles that they play in raising them.
- If there is or intends to be a complete intermingling of finances.
- If it is likely that either party will make direct or indirect contributions to the others assets that you are seeking to quarantine.
- The financial disparity between the parties.
- The purpose of the BFA.
Can a BFA be set aside and if so how?
A BFA can be set aside by the Court in certain circumstances these include:-
- The BFA was obtained by fraud (including non-disclosure of financial resources).
- In respect of the making of the BFA a party engaged in unconscionable conduct. This can occur if a party (often the wealthier party), is not open to negotiating the agreement or has pressured the other party into entering into a BFA.
- One of the parties has not had adequate independent legal advice. For more information on the importance of legal advice please see our recent article “the importance of obtaining independent legal advice in family law matters”.
- Recent case law has demonstrated that a BFA may be vulnerable to challenge in circumstances where the BFA is not fair and reasonable. This can be a risk to parties if there is an inequal financial position between them.
- That since the making of the BFA, a material change in circumstances occurred relating to the care, welfare and development of a child of the relationship and as a result of the change, a party to the BFA will suffer hardship if it is not set aside.
Are they worth it?
The short answer is yes.
While BFA’s are never ‘bullet-proof’ and there is always a chance that they could be set aside in the future, they are the most the Act has to offer a person trying to protect their wealth in a relationship. Provided that they are drafted well and both parties are given adequate legal advice and time to consider entering into the agreement, BFA’s are your best chance at preventing being involved in a lengthy property settlement after a separation.
If you would like to discuss entering into a BFA, contact one of our experienced family lawyers today for an appointment.
