What is a Prenup in NSW?
Prenuptial Agreements (PNAs), commonly known as ‘prenups’, are generally perceived negatively in society and have a social stigma attached to them, which is why so many Australians do not consider them when they get married. In fact, research by popular wedding website theknot.com.au found that only 14% of Australian engaged couples have signed prenups.
Because nobody gets married with a view to getting divorced later in life, the benefits of prenups are easily dismissed in the lead up to the big day. There is an old saying that is applicable here: “Nobody plans to fail, but many fail to plan”. Putting a prenup in place is simply risk management, for your life. Prenups are a safety precaution that becomes even more relevant when you consider that every third marriage in Australia ends in divorce (ABS).
What is a Prenuptial Agreement?
A prenup is a legally binding financial agreement between two people who are in a relationship (Marriage or De Facto) and are planning to get married in the future. In Australia, this agreement is commonly referred to as a Binding Financial Agreement (BFA).
A prenup records what assets and debts each person brings into the relationship. Finally, it states terms that outline what will happen in the event that the relationship breaks down (separation or divorce), with regards to the couple’s finances and how they are divided.
What makes a Pre-Nuptial Agreement legally binding in Australia?
- Prenups must comply with strict legal guidelines as outlined in the Family Law Act (1975).
- They must be in writing and signed by each person in the presence of a lawyer.
- Each person must have received independent financial and legal advice before signing the prenup.
- The legal advice provided must have come from a lawyer in the Australian jurisdiction.
- Each person must have signed the prenup voluntarily (free from coercion, duress or undue influence). This means one person cannot tell the other that they will not marry them unless they sign a prenup.
- The prenup must contain a complete disclosure of each person’s financial standing.
What are the benefits of Pre-Nuptial Agreements?
- Facilitate Separation or Divorce – Prenups facilitate a swift and smooth separation or divorce by preventing contentious disagreements.
- Minimise Costs – Separations and divorces can be quite costly, especially when one or both parties has a high financial standing and the relationship has ended on bad terms. The cost of a separation or divorce rises with contentiousness. A prenup will significantly reduce the associated costs.
- Minimise Acrimony – Prenups often work to reduce acrimony between the two people involved. Prenups have the potential to allow both parties to end the relationship amicably, on better terms.
- Protection – Prenups provide protection of valuable assets, including premarital property, family heirlooms and businesses owned.
- Clarity & Certainty – A prenup provides both parties with complete clarity and certainty on the events that will unfold should the relationship breakdown. This means less confusion when it comes to making decisions about the future of the relationship.
- Strengthen Relationship – Prenups have actually been shown to strengthen current relationships and make separation and divorce less likely. This occurs because a prenup forces the couple to have important discussions about their future, providing both parties with a clear understanding of the other’s intentions and thus increasing the chance of a successful and peaceful marriage.