A prenuptial agreement is a term you’ve likely heard before, but what exactly is it and does every couple need one? While discussing your relationship’s potential demise may not be the most romantic way to solidify its seriousness, a prenup could just be the most important document you ever sign.
A prenuptial agreement is an agreement made between couples who are contemplating getting married or are in a de facto relationship. If you’re in a de facto, you don’t necessarily need a prenup but it might be something to consider for a variety of reasons. A legal document like this can be extremely helpful if the couple co-owns substantial assets or if there is a wide disparity in income/wealth.
A growing number of couples are looking for the benefits and securities of a prenuptial agreement without the commitment of getting married. With the number of de facto relationships on the rise, there’s a decent number of unmarried adults living together and sharing assets without any kind of legal protection.
Before we get started, it’s important to note that this article should not be taken as legal advice. If you do need to seek legal counsel, Richardson Murray Law are Australian family law specialists who can offer tailored legal advice, particularly on topics like de facto relationships. You can contact them here.
What is a prenuptial agreement?
A prenuptial agreement (also known as a binding financial agreement) is essentially a contract between two parties which makes provisions for how their assets will be divided if they separate in the future. It is a legally-binding financial agreement that can protect both parties in a de facto relationship. This document can set out rules and provisions for things like cash, real estate, superannuation, investments, business and inheritances. It can also outline any obligations regarding debts and liabilities in the relationship.
A prenuptial agreement not only protects de facto couples in the event of separation, but it can also survive the death of a partner. This allows for the protection of assets for the benefits of children and any other heirs in the event of death. It’s also important to note that a prenuptial agreement can also make provisions for future assets that may not exist yet (like children). Regardless of your stances on creating a family, you should mention the possibility of future children and how this will impact property division (even if you aren’t sure whether or not you’ll have kids). If you do have kids further down the track and it isn’t mentioned in the agreement, then it ceases to be legally binding.
Due to the constantly evolving and sometimes volatile nature of relationships, it’s important that all future prospects like children and asset purchases are considered.
While there’s a variety of reasons people might enter into a prenuptial agreement, some include:
- Protection of assets
- Protection from debt of another party
- Protection of a family-owned business
- Clarity and certainty on the relationship
How do you create a prenuptial agreement?
Prenuptial agreements are extremely varied from couple to couple. While most cover basic assets like money and houses, the exact ins and outs will vary. If you’re unsure of where to start, it’s a good idea to seek legal advice to help draw up your agreement. You’ll need a lawyer further down the track so it doesn’t hurt to introduce them sooner.
Richardson Murray Law specialise in both family & relationships and financial matters, offering trusted legal advice around the country. Creating a legally binding agreement with all the correct information can be a highly stressful process, so turning to professionals early is recommended in most cases.
How do you make it legally binding?
For a prenuptial agreement to be legally binding, it has to meet strict criteria. If it fails to meet these, it can be overturned by the Family Court so it’s extremely important to get it right.
One of the most important conditions is that both parties have a comprehensive understanding of their legal rights and have received independent legal advice. Both parties legal counsel must write a statement outlining the rights of their client, the advantages and disadvantages of the agreement and stipulate that the provisions made are fair and equitable. This statement is then attached to the agreement. All parties (including each lawyer) must then sign the agreement to ensure it is valid.
Lastly, don’t forget to each write a Will. Even with a cohabitation agreement, it’s important that you both have separate Wills to protect your surviving partner in the event of your death. You might consider rewriting your Wills at the same time you create your cohabitation agreement – this ensures everything is up to date and your assets will be divided exactly the way you want. We have a guide to writing a Will if you’re not sure where to start.