A prenuptial agreement (or what is formally known as a Binding Financial Agreement/BFA in Australia) is a legally binding contract between two people contemplating marriage or entering into a de facto relationship. It sets out how the couple’s finances will be managed if the relationship ends due to separation or divorce.
What is a prenuptial agreement?
A prenuptial agreement is a legal agreement that can include how property rights, debts, superannuation, family heirlooms, businesses, and investments will be divided, including assets brought into the relationship, including from an earlier relationship or inherited as separate property.
While a prenup offers considerable protection, it cannot include proposed court orders or binding clauses in relation to child support or parenting arrangements – these matters must be dealt with separately and always in the best interests of future children.
What can a prenuptial agreement cover?
Your prenup can be as specific or as broad as you need it to be.
Typically, an agreement covers:
- Division of the party’s property
- Financial resources and financial interests
- Superannuation and investment portfolios
- Ownership and division of family heirlooms
- Spousal maintenance or ongoing financial support
- Debt management
- Responsibilities for ongoing or anticipated expenses
It is commonly used by couples who are entering into marriage or a de facto partnership who want clarity over their finances, especially where one partner brings significantly more assets into the relationship or where there’s a second marriage involved.
However, the agreement cannot predetermine child support or parenting outcomes – that would require a binding child support agreement or parenting plan or court order if there are children of the relationship at the time of separation.
Who should consider a prenup?
Prenuptial agreements are not only for the wealthy – they are useful for anyone looking to safeguard their financial future. They are particularly useful for de facto partners, young couples starting out, blended families, entrepreneurs and those who own high-value separate property they want to retain.
They’re also beneficial for:
- Couples entering marriage or living together long-term
- Partners with financial interests in family businesses
- People with children from an earlier relationship
- Individuals with self-managed super funds or substantial inheritances
- Anyone wishing to avoid a potentially costly exercise like litigation if the marriage ends
Legal requirements & full disclosure
For a prenup to have legal status, it must meet strict requirements under the Family Law Act 1975. Each party must:
- Disclose all assets, debts, and financial circumstances – non-disclosure can void the agreement.
- Receive independent legal advice from a qualified legal practitioner.
- Enter the agreement voluntarily and without pressure from the other party.
- Have the agreement signed and certified by their respective legal counsel.
Obtaining independent legal advice ensures that each person understands their rights, the agreement’s effects, and whether it is in their best interests to proceed. Lawyers must also sign certificates confirming that this advice has been given, adding another layer of protection to the agreement’s validity.
The benefits of a prenup
There are several compelling reasons to put a prenup in place.
This type of financial agreement can:
- Provide certainty and security over financial matters
- Allow for peaceful dispute resolution without the need for litigation
- Protect separate property and the parties’ property acquired before the relationship
- Safeguard family heirlooms or businesses from claims by an ex-partner
- Prevent misunderstandings about financial expectations
- Avoid lengthy court orders or intervention during separation
A well-drafted prenup offers financial protection as well as emotional benefits. It can relieve anxiety about the unknown and allow couples to move forward with greater trust and transparency.
Can a prenuptial agreement be overturned?
Although designed to be binding, the Federal Circuit and Family Court of Australia can set aside a prenup in limited circumstances, such as:
- Failure to provide full and frank disclosure
- One party not obtaining independent legal advice
- Fraud, duress, or non-disclosure
- A significant change in circumstances, such as the birth of a child
- The agreement being found unconscionable, unfair, or poorly drafted
If the court determines that the agreement is invalid, it may substitute the prenup with new orders or ignore it entirely when deciding a property settlement.
How to get a prenup – A step-by-step process
1. Have the conversation early
Start discussing the idea of a prenup well before the wedding or moving in. Leaving it to the last minute can lead to stress and even legal challenges about undue pressure or coercion.
2. Engage trusted legal counsel
Each person must engage their own legal practitioner to receive independent legal advice. You’ll need a lawyer with experience in family law to ensure the agreement is valid and tailored to your needs.
3. Make full financial disclosure
Both parties must fully disclose their financial position, including income, debts, property, and superannuation. This ensures fairness and increases the agreement’s validity.
4. Draft the agreement
Your lawyers will help you draft the prenup. This document must be in writing and clearly state what the agreement covers. Make sure it’s customised to suit your relationship and circumstances – there’s no such thing as a one-size-fits-all prenup.
5. Review & finalise
Once drafted, each party must review the document with their legal counsel. Both parties must then sign the agreement. Your lawyers will also sign certificates confirming legal advice was provided.
When the agreement comes into effect
Your prenup takes effect as soon as it is signed and properly executed. It remains valid during the relationship and will be used in the event of a relationship ending, such as:
- Divorce
- Separation
It can also be updated or replaced if there is a significant life change, such as acquiring new assets, having children, or starting a business. Revisions will require fresh legal advice and documentation.
Final thoughts: Is a prenup right for you?
Whether you’re entering into your first marriage, a second marriage or forming a long-term de facto relationship, a prenup offers peace of mind and clarity over property rights and financial support. It’s not just about anticipating the worst – it’s about planning responsibly for your future.
With help from a family law specialist or experienced legal practitioner, you can create a legally sound agreement that protects both parties and reflects your shared values.
If you need further assistance in understanding what prenuptial agreements are and how they work in Australia, then speak with one of our Binding Financial Agreement lawyers today. Getting the right advice at the right time can make all the difference.
