Are prenups worth the paper they're written on?
Yes, if you engage an expert family lawyer, who will draft your agreement carefully and give you the right advice.
Watch on to hear CGW special counsel Leeann Murphy explain why.
Hi. I'm Leeann Murphy. I'm special counsel at Cooper Grace Ward Lawyers.
Today, I'd like to talk to you about prenuptial agreements. Also referred to as prenups or financial agreements. And so the first question is, what is a prenup? In Australia, we refer to them as financial agreements. A financial agreement is an agreement between parties that sets out what arrangements they intend to have in place regarding property settlement and spousal maintenance matters. In essence, it is contracting out of the rights and obligations that might apply under the Family Law Act. In these cases, the parties to these agreements are saying, "I do not want the Family Law Act to determine my rights and obligations upon the breakdown of my relationship. I wish to set the terms about what happens in that scenario." And those terms are what's included in a financial agreement.
So, what can be included in a financial agreement? Can you include parenting matters? Definitely not. It is only financial matters. Anything relating to property settlement or spousal maintenance matters can be contained in the terms of a financial agreement. There are some common scenarios where parties come to us asking for us to draft a prenuptial agreement or a financial agreement. For example, it may be the case that one of the parties has significantly more assets than the other and they wish to isolate those assets and keep them separate so that their children from previous marriages may inherit those at a later point. The agreement may also provide that any assets accumulated jointly with their spouse during that relationship can be divided equally or in another way upon the breakdown of the relationship, but that otherwise a former spouse has no claim or right against the assets that existed prior to the relationship.
Another example of where a financial agreement may be appropriate prior to entering into a relationship may be where one of the spouses has significant wealth at the outset and the other does not. The terms of the agreement may provide for payment in accordance with the number of years that the parties have been married. For example, there may be a provision for a car, home and the sum of $10,000 for each year of the marriage. It is also possible to seek specific termination clauses in a financial agreement. For example, the parties may wish to terminate the agreement upon the birth of a child or upon the relationship, reaching a milestone such as ten or years in length. The common question is also when can a financial agreement be set aside? There are a number of circumstances where an agreement may be set aside, and the most common of these is where there has been no or inadequate disclosure or inappropriate or misrepresented valuations of assets. When you are entering into a prenuptial agreement or a financial agreement, it is imperative that you satisfy yourself as to the composition and value of the asset pool. It may be appropriate to seek expert advice from accountants or real property valuers to satisfy yourself as to the valuation of those assets at the time that the agreement is entered into. In this respect, it will be clear from the agreement in many years' time what the financial circumstances of the parties were at the time the agreement was signed.
It is also possible for a financial agreement to be set aside on the grounds of duress. In this respect, we urge you to seek independent legal advice well prior to commencing a relationship or becoming married. In the case where an agreement is being negotiated or signed days or even weeks prior to a wedding or moving in together, it could be argued that one of the parties has only entered into the arrangement under duress. If that can be substantiated, then there is a possibility that the financial agreement may be set aside. It is also possible for a financial agreement to be set aside because it does not meet the technical requirements set out in the Family Law Act. It is vital to ensure that you get expert advice regarding the drafting and the advising regarding financial agreements. In this respect, if an agreement does not adhere to the technical requirements of the Act, it may be set aside.
It is a common misconception that financial agreements are simply a precedent that is easy to prepare. That is simply not the case. These documents are bespoke and we prepare them in accordance with your instructions. Regarding your own financial circumstances and what you wish to occur upon the breakdown of your relationship, it is vital that you obtain advice from a family lawyer who has expertise in this area.
Cooper Grace Ward is a leading Australian law firm based in Brisbane.
This publication is for information only and is not legal advice. You should obtain advice that is specific to your circumstances and not rely on this publication as legal advice. If there are any issues you would like us to advise you on arising from this publication, please contact Cooper Grace Ward Lawyers.