Pre-Nuptial Agreements- The pros and cons and top 5 reasons why you should be considering one


If you’re thinking of walking down the aisle or moving in with your partner, then it may be time to think about a Financial Agreement, commonly referred to a pre-nuptial agreement or ‘pre-nup’.

What is a Financial Agreement?

A Financial Agreement is a written contract entered into between married or de facto couples setting out how their assets are to be divided in the event of separation.  

By entering into a Financial Agreement, parties are prevented from ever applying to the Family Court seeking a property adjustment order.

To be binding on the parties, the couple must each consult a lawyer who will give them advice as to the advantages and disadvantages of entering into the Agreement.  Both parties and their respective lawyers will sign off on the Agreement, with one person to then retain the original copy and the other person to retain a copy of the Agreement.  The Agreement is not registered in court, but becomes binding once signed by all parties.

What can and can’t be covered in a Financial Agreement 

Financial Agreements cover how property, including superannuation, can be divided in the event of a separation.  It is not uncommon for a wealthier party to want to protect or quarantine the assets they have acquired prior to the relationship from being divided in a property settlement at in the event of a separation and for the parties to agree that any joint assets or assets acquired during the relationship, are to be divided equally or in proportion to their respective contributions to that asset.

Spousal maintenance or ongoing, periodic financial support can also be included in a Financial Agreement. Spousal maintenance arises if there is an income disparity between separated parties, then the party with nil or low income can pursue spouse maintenance from the higher income earner.   A Financial Agreement can set out what, if any, amount must be paid to the low income party and for what period.

Parenting arrangements and financial arrangements for children in the event of a separation cannot be dealt with in a Financial Agreement.  Unlike some jurisdictions, penalty clauses for certain behaviours, for example, adultery cannot be included in the Financial Agreement

The Pros and Cons of Financial Agreements

An advantage of entering into a Financial Agreement is the certainty and control over your future financial position and the prevention of costly litigation in court in the event of a separation.  Financial agreements can be helpful in promoting an amicable and reasonably fast division of assets and liabilities following a relationship breakdown. 

As Financial Agreements are not subject to the scrutiny of a court prior to being signed, parties are free to negotiate as they wish, including agreeing to a bad deal.  Further, they are typically entered into by parties at a time when the relationship is at its best and therefore the parties may agree to a level of financial support and transfer of property they think is reasonable at the time, but later realise that what they agreed to 10 or 20 years ago is no longer appropriate given the lifestyle they have lived in since signing the Agreement.

Top five reasons for entering into a Financial Agreement 

1. Are you remarrying or have children from a prior relationship – In the event of your passing, a Financial Agreement can be used to ensure that your assets are distributed according to your wishes to ensure that your first family, or your second family are not financially cut off.   

2. You earn more than your partner – A Financial Agreement can be used to limit or prevent the amount of spousal maintenance you may have to pay in the event of a separation and for what period of time you are liable to pay.

3. One of you is much wealthier than the other –You may want to protect your assets if you have a higher financial worth than your new partner.

4. One of you has a lot more debt than the other – If your partner has a high debt level, you probably don’t want to be responsible for some of that debt in the event of a separation.

5. You own a business – Protecting your investments can be important if you own a closely held family business or a business with other people.  Your business interest would be included as an asset of your relationship and potentially open to the court ordering the sale or transfer of your business interest to your ex-spouse in the event of a separation.  A Financial Agreement can prevent this and secure your business interest.

If you are uncertain as to whether you need a Financial Agreement or not, or whether your relationship is a de facto relationship that may require the need for a Financial Agreement to protect your assets, then contact us for a confidential discussion. 


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