You may have heard of people asking for ‘prenups’ from discussions with friends, in the news, in movies or even songs, as Kanye West so famously sung ‘we want prenup, we want prenup, yeah!’.
So, what is a prenup? Are prenups legal in Australia? How can you ensure your prenup will protect you in the unfortunate event that you separate from your partner? Keep reading to find out!
What is a prenup?
A prenup is a financial agreement between you and your partner, prior to cohabiting or marriage.
The purpose of a prenup is to create a legally binding document that sets out what is to happen to each parties’ assets and liabilities, including any joint property, in the unfortunate event of a separation.
For example, a prenup can stipulate that each party keeps what they brought into the de facto relationship or marriage, and any joint property purchased during the de facto or marriage, is to be divided equally.
Does Australia have prenups?
In Australia, a prenup is known as a Binding Financial Agreement, or ‘BFA’ for short.
The High Court of Australia considered the validity of prenups in the case of Thorne v Kennedy.
In a nut shell, Thorne v Kennedy involved a very wealthy 67 year old ‘gentleman’ and his much younger, minimal-English speaking wife. The husband gave the wife the prenup ten days before the wedding. The husband, ever so romantically, told her that if she did not sign it, the wedding would not go ahead.
The prenup stipulated that in the event the parties separated after three years of marriage, the wife would receive $50,000 plus CPI indexed increases.
The wife, against the advice of her sensible lawyer, signed the prenup four days before the wedding.
You may have guessed it, the parties separated after four years of marriage.
The High Court found the prenup was void due to the husband’s undue influence and unconscionable conduct.
How can I make sure my prenup will protect me?
A BFA can be set aside if the court considers a party’s behaviour amounts to undue influence, unconscionable conduct and duress.
For a prenup to be valid, the following principles apply:
- each party must enter into the agreement freely
- the agreement must be subject to negotiations
- the prenup must be compliant with the Family Law Act
- one party cannot pressure, threaten or take advantage of the other party to get them to agree to a prenup or sign a prenup
- there must be time for each party to reflect on the independent legal advice from their lawyers
- each party must receive independent legal advice
This is not an exhaustive list and each of these factors alone will not be enough to ensure that the prenup is valid.
The Court will also consider the nature of the parties’ relationship and their respective financial circumstances.
That being said, just because a BFA is a “bad bargain” for one party, does not necessarily mean it will be void.
We have provided more detail on prenups, including a pros and cons list of prenups in our blog ‘Pre-Nuptial Agreements in Australia: Pros and Cons’.
We suggest that you use this link to understand the advantages and disadvantages of entering into a prenup with your partner.
If you require assistance with drafting, reviewing or getting independent legal advice on binding financial agreements or want to discuss your options, please contact our Melbourne Family Law expert at Rowan Skinner & Associates Lawyers, LIV Specialist Family Lawyers, to arrange a complimentary no-obligation discussion.