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Prenuptial Agreements

Prenup = Binding Financial Agreement

In Australia a “prenup” is legally referred to as a Binding Financial Agreement or BFA.

A BFA can be drafted:

a) prior to commencing a relationship

b) during the relationship

c) after separation

A BFA works for both marriage and de facto relationships.

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Pros

 Advantages of BFA

With regard to the advantages in undertaking a BFA, we advise as follows:

  1. This provides the best possible protection for your pre-marriage assets in the event that the marriage breaks down. It is a form of insurance that you will hopefully never need.
  2. The agreement reflects what the parties consider reasonable at a time when they are happy together.
  3. The BFA provides security where one party has been through a previous separation.
  4. The BFA provides you with an understanding of Separate and Joint assets. Thus allowing the parties to decide what property they wish to share.
  5. The BFA is usually more costs effective than trying to divide assets post separation.
  6. The BFA prevents and/or minimises legal recourse in the event that the marriage breaks down. In other words, in the event that the marriage breaks down, then the parties’ right to challenge the other’s separate assets is severely diminished. No contract can prevent a party from going to Court, but the BFA means that most Court action would be fruitless.

Cons

Disadvantages of BFA

With regard to the disadvantages in undertaking a BFA, we advise as follows:

  1. This can cause awkwardness and difficulty with the other party depending on how the subject is raised – it is unromantic.
  2. Remaining financially separate may cause marital difficulties.
  3. The BFA does not include third parties, it can only be between the spouses.
  4. It is impossible to cover all situations.
  5. The Courts do not provide a service where they give the BFA a stamp of approval – this provides a slight degree of uncertainty.
  6. There are circumstances in which the agreement could be set aside.

Strength of a BFA - Independent Legal Advice Keeps BFA Binding

The strength of a BFA was tested in the recent case of Kennedy & Thorne [2016] FamCAFC 189. In this case the wife was not able to claim that the BFA was signed under duress when she had clearly received independent legal advice. The wife’s lawyer told her not to sign the BFA but she ignored the legal advice. The BFA was held to be binding on the parties.