What are postnuptial agreements in family law matters? These binding financial agreements address the issues of a couple after the marriage has taken place. This is different from a prenuptial agreement that is used before the marriage. A person may also enter into a Financial Agreement before, during, or after a de facto relationship ends. But what issues can a postnup address? This may include:
- Division of joint assets and the couple's marital property
- Declaration of ownership on assets that were owned before the postnup was created
- Spousal maintenance
- Inheritance or gifts
Read: Does Inheritance Have to Be Shared With a Spouse?
A typical postnuptial agreement can provide clarity and certainty regarding property settlement in the event of a divorce. This can help couples avoid future disputes and potentially lengthy and costly legal proceedings. Additionally, postnuptial agreements can provide both spouses peace of mind especially if they are in a second marriage or in a blended family.
What Does the Law Say?
The Family Law Act 1975 is the primary legislation that governs postnuptial agreements. In fact, according to Section 90G of the Family Law Act, a postnuptial agreement will become binding for both parties if:
- Both parties write and sign the binding financial agreement
- Each party received independent legal advice. Family lawyers can explain each party's rights and the advantages and disadvantages they may face if the agreement was enforced.
- Each party is given a signed statement outlining their legal advice by their legal practitioner. A copy of the signed statement must also be given to the other party or the other party's legal practitioner.
- The court has not terminated or set aside the agreement.
Postnuptial Agreement vs Prenuptial Agreement
1. Execution
Prenuptial agreements are typically negotiated and signed during the engagement period. This means that both parties must not have entered into the legal and emotional bonds of marriage yet.
Postnuptial agreements, on the other hand, are negotiated and signed during the marriage. This is when spouses may have already accumulated assets or experienced changes in their circumstances.
2. Legal Requirements
In order for prenuptial or postnuptial agreements to be legally binding, couples must meet certain legal requirements, such as:
- Make full and frank disclosure of assets;
- Obtain independent legal advice from a family lawyer
- Voluntary and informed consent from each party; and
- Fairness at the time of execution
Full and frank disclosure is a legal requirement for parties to provide a complete and accurate account of their assets. This may include real estate, bank accounts, investments, loans, credit card balances, and other financial obligations. Failure to disclose all relevant information can render the agreement invalid.
3. Purpose
Prenuptial agreements are often used to protect the assets of one or both parties in the event of a divorce or separation. This is true especially if parties have significant assets or are entering into a second marriage. Postnuptial agreements can serve a similar purpose. However, they can also be used to address issues that have arisen during the marriage and clarify any misunderstandings or disputes.
Why Do Some Couples Avoid Making a Postnuptial Agreement?
Some couples may feel secure in their relationship and not actually opt for binding financial agreements. However, other couples may feel like their assets or finances are at risk if a divorce occurs. Even if this is the case, these couples may not have the courage to speak to their partner about postnuptial agreements. This may happen due to:
- Fear of damaging the relationship: Some couples may worry that discussing a postnuptial agreement could cause tension or lead to distrust in the relationship. They may feel that talking about the possibility of divorce or separation implies a lack of commitment to the marriage.
- Fear of unequal power dynamics: In some cases, one partner may have significantly more wealth or assets than the other. A postnuptial agreement could create a power imbalance in the relationship. The less wealthy partner may feel pressure to agree to terms that are not in their best interest.
- Lack of knowledge or understanding: Many people are not familiar with the legal aspects of prenuptial or postnuptial agreements. They may also be intimidated by the process or may be unsure of what they are agreeing to. This is why it's important to seek legal advice from a family lawyer.
- Emotional attachment to assets: Some people may feel that discussing a postnuptial agreement means putting a price on sentimental or emotional assets. Such sentimental assets may include family homes. heirlooms, and even house pets. They may be reluctant to put a financial value on these assets or, to consider the possibility of facing financial and emotional costs.
- Domestic violence: Some couples may be afraid of discussing postnuptial agreements especially if they have a violent partner. For instance, a wife wants to claim ownership of her car. However, she is afraid that her husband might try to intimidate or hurt her if she tries to open it up to him.
Why Should Couples Use Binding Financial Agreements?
Postnuptial agreements can help a couple clarify their financial responsibilities in the event of a divorce. Indeed, it may be difficult for some partners to open up about a postnuptial agreement to their partner. However, it's important to know that this can reduce the costs of expensive court proceedings should they want to separate properly.
If a person is able to communicate effectively with their spouse, they may discuss the following in their postnuptial agreements:
- Financial assets and debts: This may include any mortgages, rent, or any assets and debts a couple may receive during the course of their relationship.
- Spousal maintenance: According to Australian laws, the higher-earning partner is responsible for providing spousal maintenance for their lower-earning partner after divorce or separation. If couples opt for a postnuptial agreement, they should assess if spousal maintenance is needed or not.
- Inheritance and estate planning: This is important to discuss especially if one or both partners will receive significant inheritance or gifts in a Will.
- Business interests: This is for partners who own a business or have significant assets in the business.
- Children from previous relationships: Partners who have children from previous relationships may have to talk about child support. This is an ongoing financial obligation for concerned parents/guardians who have childcare responsibilities.
- Dispute resolution: If couples end up in a dispute regarding their postnuptial agreement, they may seek mediation and arbitration services from a family lawyer.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
