Planning a future together, either for a wedding or de facto relationship, can be complicated. Signing a prenup, better known as a Binding Financial Agreement in Australia, is a great opportunity to get on the same page.
What is a prenup?
A prenuptial agreement (or prenup, as it is more commonly known) is an American concept. In Australia, we don’t refer to them as prenups. We call them Binding Financial Agreements. Our Binding Financial Agreements can be used at any stage of the relationship, whether before, during, or after.
When a Binding Financial Agreement is made before or during a relationship, it is to protect the assets of one or both parties. It will usually stipulate that both sides will retain all of the assets they individually brought into the relationship, should they separate. Any assets obtained jointly are dealt with separately.
When a Binding Financial Agreement is made after a relationship has ended, it is usually used to settle the property division between the two parties.
Should I arrange a Binding Financial Agreement?
You may choose to arrange a Binding Financial Agreement if:
- One person in the relationship has a higher debt load than the other
- One or both parties are small business owners or entrepreneurs
- One party is much wealthier than the other
- One or both parties have been married before
Talk to Rose Lawyers if you think a Binding Financial Agreement is right for your circumstances.
What is involved when putting together a Binding Financial Agreement?
The division of property or the prevention of division of property is most explicitly included. It is possible to add a spousal maintenance component as well. Depending on when the Binding Financial Agreement is made, there may be different factors to consider. If the Agreement is made before or during the relationship, the parties may want to consider what will happen if they have children or if one of them becomes seriously ill during the relationship. Where an Agreement is made once a relationship ends, it is always when the parties have agreed between themselves as to how their assets are divided.
For example, Party A has the most assets and may decide that if the relationship ends within the first five years, then Party B is to receive nothing. However, if the relationship breaks down between five to ten years, then Party B is entitled to 25%. If the relationship ends after 15 years, Party B may be entitled to 50%, and so on.
A Binding Financial Agreement may address:
- What each party’s separate property is
- How the parties would split their home home and other major assets in the event of separation
- The dividing up of marital property of the relationship
- The dividing up of debt of the relationship
A Binding Financial Agreement does not address child custody agreements.
Can a Binding Financial Agreement be challenged in court?
Binding Financial Agreements are still a relatively new invention - this may be why some lawyers prefer Consent Orders. The difference between the two is that Consent Orders can be drafted by one party or their lawyer and then submitted to the Court on behalf of both parties. The Court then decides if the division of property is just and equitable and if the Court is satisfied about this, it will make the requested Order.
A Binding Financial Agreement circumvents the Court and involves one party instructing their lawyer to prepare the agreement. The other party then takes the agreement to their own lawyer who will review the document and negotiate any necessary changes. Both clients and their respective clients sign the agreement which makes it binding.
There is a prerequisite that full disclosure is made. A Binding Financial Agreement can be overturned if it is later found out that one of the parties has hidden or withheld assets from the other.
Deciding whether to prepare a Binding Financial Agreement or Consent Order can sometimes be a difficult choice. Let Rose Lawyers help you determine the best one for your scenario, with professional and qualified advice. Contact us today on 03 9878 5222 for a free confidential discussion about your concerns.