When is a Pre-Nuptial Agreement Needed?

When is a Pre-Nuptial Agreement Needed?


What are Pre-Nuptial Agreements ?
 

While relatively new to Australia, Pre-Nuptial (“before marriage”) Agreements, or Pre-Nups, they are widely used overseas, particularly in the United States. They are given legal authority by the 1975 Family Law Act. They are also called Binding Financial Agreements. Pre-Nups are a type of contract between a couple intending to get married.

Why a Pre-Nup? 

People sign Pre-Nups for a variety of reasons, but mainly because one party wants to protect assets they are bringing into the marriage from the other party. This is particularly so where, for example, the groom has significant assets, such as a house, investment property, business or superannuation, while the bride may have fewer financial assets. Pre-Nups are frequently used where it is a second (or third) marriage for one of the parties. “My ex. took me to the cleaners – I don’t want that to happen again.”

What about children? 

Family Lawyers should always advise their clients who are thinking about a Pre-Nup, to consider the possibility that they may have children. The Pre-Nup should either state how assets are to be distributed if the marriage ends and there are children, or that the couple will sign a new Pre-Nup if they do have children. There is a risk that, if the Pre-Nup is silent about children, they come along, and the marriage later breaks down, the parent who has the primary care of the children may go to Court and ask that the Pre-Nup be set aside, because it did not provide for the arrival of the children.

“Last Minute” Pre-Nups 

There have been a number of cases that have gone all the way up to the High Court, where a couple have signed a “quickie” Pre-Nup, just before the marriage. These have included where one party has told the other that the marriage won’t go ahead unless they sign a Pre-Nup, which is usually very unfavourable to the other party. In a recent High Court case, an older, very wealthy man had sponsored a woman to migrate to Australia from an Eastern European country. They enjoyed a lavish lifestyle before the marriage, the man paid for the woman’s family to come to Australia for the wedding, it was all arranged, and then he presented her with a Pre-Nup that gave her practically nothing if the marriage failed. And he threatened to call off the wedding and have her deported if she didn’t sign. To make matters worse, he told her to see a lawyer that he had chosen and who did not advise her properly about the Agreement. She signed, they married, the relationship later broke down, she went to Court, the Pre-Nup was set aside and a property settlement favourable to her was negotiated. While that was an extreme case, Family Lawyers are wary about advising a client to sign a Pre-Nup close to a wedding.

Do Lawyers have to be involved in Pre-Nups? 

The short answer is Yes. The Family Law Act makes it clear that each party must, that is, must get independent legal advice before they sign a Pre-Nup. And that advice must be truly independent – not a good idea to take the bride to the groom’s lawyer mate and sit in the waiting room while she gets her “independent” advice.

Are Pre-Nups forever? 

Unless otherwise set out in the Agreement, a Pre-Nup lasts as long as the marriage. While the Family Law Courts do have the power to set aside Pre-Nups, they won’t do so unless there is a technical problem with the Agreement (the wording is wrong, it wasn’t signed properly), or there has been undue influence – as with the example above. The fact that the Pre-Nup is “unfair”- it gives one party a disproportionate share of the assets if the marriage breaks down – is not normally a sufficient reason to set it aside if it’s otherwise technically correct.

What about Pre-Nups and Wills? 

A Will does not necessarily override a Pre-Nup. It’s a good idea to have the couples’ Wills reflect the terms of the Pre-Nup. If one party dies without leaving a Will, their estate may be distributed by the Probate Court in accordance with the provisions of the Pre-Nup.

Can you have a “Post-Nup”? 

Yes, a Binding Financial Agreement can be made before or after marriage and they are also used as settlement documents in distributing property after a relationship has broken down.

De factos? Same sex couples? 

Yes, they can enter into Pre-Nups, the same as couples getting married.

This is a complex area of the law. Pre-Nups are important documents. They have to be very carefully drafted to protect the interests of the parties. It’s a good idea to consult an experienced Family Lawyer, earlier rather than later, to discuss what you and your partner are planning to put into the Agreement. Our four Family Lawyers at Tonkin Legal Group are here to help you through that process with careful, considered advice. Book an appointment with us now. 

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This is general information only. Please contact the team at Tonkin Legal for expert legal advice that takes your unique personal situation into account prior to making any decisions based on this article.

Richard Tonkin

Richard Tonkin

Author

Richard Tonkin is a Consultant Lawyer and one of Victoria’s most experienced and respected Family Lawyers.