Legal Standing of Prenups (BFAs) in Australia
The Family Law Act of 1975 recognises BFAs as legally binding documents that can be used to determine the division of assets and financial support in case of divorce, separation, or death. Legal enforceability affords couples a high degree of control over asset distribution, including property and spouse and de facto maintenance should their relationship end. The average divorce in Australia occurs after 12 years, so it is practical for couples to consider entering into one at any stage during the relationship.
Requirements for a Legally Binding Prenup (BFA)
- The BFA must be in writing and signed by each consenting party.
- It must not be made under duress, fraud or undue influence.
- Each party must provide full disclosure of their financial assets.
- Both parties must have received independent legal advice before signing.
- A signed statement from a lawyer confirming the provision of independent legal advice.
There is no difference between prenups and binding financial agreements, so it is common for people to use both terms. They have become popular with people who marry later in life, sometimes with significant assets, and have children from previous relationships – catering to the evolving dynamics of modern relationships and blended families. It is important to clearly understand what is a binding financial agreement to see if it suits your situation.
It is an important consideration for those who wish to protect their pre-relationship assets and safeguard inheritances or gifts they may receive during a relationship, which is why the potential costs of preparing binding financial agreements may be well worth it in the long run.
Benefits and Limitations of Prenups
Prenups can provide protection and certainty for both parties, but they are not foolproof. It is essential to understand the benefits and limitations before entering into one.
Benefits
- Protects Premarital Assets: A prenup or BFA can safeguard any assets you owned before the marriage, including investments, businesses and real estate.
- Helps Avoid Lengthy Legal Battles: If you are considering getting a divorce, a prenup can prevent lengthy and costly legal battles over assets – saving you money and stress.
- Provides Security for Children from Previous Relationships: A prenup can ensure children from a previous relationship are financially provided for in case of your death or divorce.
Limitations
- Legal Requirements Must Be Met: These documents must meet certain legal requirements to be enforceable. If not, the agreement can be challenged in court and declared invalid.
- Can Be Invalidated by the Court: A poorly drafted or poorly executed prenup can be deemed invalidated, putting a couple under greater stress as the divorce looms.
- Can Be Challenged by the Other Party: Despite being legally binding, prenups can still be challenged in court if one party believes it is unfair or was signed under duress.
Impact of Prenups on Divorce Proceedings
Having a prenup can speed up proceedings as your divorce lawyer has a clear outline of how assets will be divided. This can save both time and money for the couple.
However, if one party challenges the agreement’s validity, it can prolong the proceedings. That’s why it is important to get it right in the first place in order to uphold its validity. If not, the court can set it aside. This happened in a prominent case where a Queensland property developer was found to have coerced his partner into signing the agreement just days before their marriage.
The NSW family court views BFAs as legally binding documents as long as they meet the necessary requirements to be enforceable. The division of assets during a divorce will often follow the agreement outlined in the BFA unless it is successfully challenged in court.
Should You Get A Prenup?
A prenup can provide peace of mind and protect assets, but it is not for everyone. It’s always ideal to discuss with your partner whether this is the right path for your relationship. A prenup is not always about a lack of trust but a practical way to protect assets and ensure financial security for both parties.
It is crucial to seek legal advice from a qualified family lawyer before signing binding agreements. Communication and honesty are key in any relationship, including discussing a prenup.
Conclusion
Prenups or BFAs can provide a sense of security and control over assets in case of a relationship breakdown. Tempting as it may be to set up your own binding financial agreement with all the DIY kits, it is only upheld in court when it meets certain rules and policies. It is crucial to consult with legal professionals and enter into these agreements with full understanding and consideration.
Whether or not you decide to get a prenup, open and honest communication with your partner is always essential for a healthy and happy relationship. So, it’s worth discussing with your partner even if you ultimately decide against getting one. Ultimately, the decision on whether to get a prenup should be made by both parties together.
At Arcadian Legal, we are highly experienced in preparing binding financial agreements. Our fixed-fee binding financial agreements provide certainty and peace of mind, knowing we leave no stone unturned to protect you and your assets. We know the questions to ask, the information that needs to be included, and what it takes to ensure the agreement is binding.
Call us today if you need some advice on what to do in your situation. We can help you decide whether this path is right for you and your partner!
