Mention the word “pre-nup” and clichéd images of young “gold diggers” marrying rich old widows or widowers traditionally spring to mind.
However, these images date back to a time well before our current enlightened relationships laws. In this day and age, there are now good and compelling reasons for just about everyone who is about to walk down the aisle or to commence co-habitation in a de facto relationship to consider the benefits of a pre-nup or Binding Financial Agreement with their intended partner before they embark on that course.
When relationships break down, there can be a lot of emotional pain and hostility involved. This can make discussions about your finances and the division of assets difficult and unproductive. On top of that, litigation is costly, time consuming and stressful. That’s why agreeing in advance how this process is to work makes a lot of sense.
What is a financial agreement?
If you are:
- Married or living in a de facto relationship; or
- Planning to marry or live together;
you can, by signing a financial agreement, protect your property from claim or clarify how that property will be split if you separate.
You are mistaken if you think that the assets you have in your name before you marry or start living together will be free from claim by your spouse or partner. The only way to protect, or quarantine, those assets from a property settlement claim is through the use of a financial agreement.
Even if you currently have fewer assets than your partner, it may be useful to protect future property, such as an inheritance.
Financial agreements are available to couples in de facto relationships, including same-sex couples and married couples. In both instances, agreements can be reached in anticipation of the couple moving in together or marrying.
Do I need a lawyer or can my partner
and I write up our own agreement?
You must each have lawyers because there are strict legal requirements that must be met before the agreement is effective.
One of those requirements is that you each receive independent legal advice before you sign the agreement. Independent legal advice means you must have different lawyers and those lawyers cannot work in the same legal practice.
Prior to signing the agreement, your lawyers must advise you about the effect of the advice and about the advantages and disadvantages of the agreement and give you a signed statement confirming that advice has been given. Each lawyer must also give a copy of that statement to the other party or their lawyer.
What information will I need to give my lawyer to help them prepare a financial agreement?
You should collect information about your current financial circumstances, including your assets, liabilities and financial resources. This information needs to be exchanged with your partner so that you both have a clear idea of each other‘s finances. This is important because unless you know each others’ financial situation one of you could later argue that you were misled about the others’ financial position. That could be grounds for a Court to overturn the agreement.
You need to think about the future needs of the two of you, both as a couple and if you separate. You may need independent advice from a financial advisor to work out what assets or money you will need to meet your needs.
Does my financial agreement replace my Will?
No. The separation agreement can only deal with how you divide your assets in the event of separation. Death before separation will not trigger the terms of the agreement. For that reason it important that you also consider how you would want to leave your property in the event of death and have your lawyer prepare a Will that is consistent with your wishes.
Do you need a Financial Agreement?
If any of the following circumstances apply to you, it would be sensible to obtain legal advice about making a pre-nup:
- You have children from a previous relationship;
- You run a business;
- You have received or expect to receive an inheritance;
- There is a significant difference in the wealth of you and your partner;
- You jointly own an asset with a parent or friend that you wish to protect;
- You or your partner have substantial debts.
Start here with a confidential consultation. Phone: 1300 368 258