Time to read : 4 Minutes
So, you’re in a happy, shiny new relationship and you are dreaming about an idyllic future together.
Unfortunately, there is a possibility that shine will come off… and your dream will turn into a nightmare.
And that nightmare is far more likely without a legally binding prenuptial agreement.
Here’s the who, what, when and how of protecting your money – should your relationship come to a crossroads and you go the other way.
Who needs a prenup and when
In Australia, prenups are more correctly called binding financial agreements.
You might have heard someone say that these are not worth the paper they're written on.
That’s not true. At least it isn’t if they meet two main criteria:
Both parties obtain independent legal advice.
Both parties disclose all assets – and debts – up front.
It’s mainly if one person is disadvantaged from the get-go or if someone hides assets, that prenups can be challenged.
And if you think remaining unmarried keeps any money or assets you take into a relationship safe, think again.
Though generally you need to have been living together for two years for a legal claim on assets, the courts will consider this earlier if:
You have a child together or
One party has made a substantial contribution to the assets or welfare of the other/family.
With many Aussies now entering committed relationships not just older but richer, and with growing numbers of parents helping out their kids financially (for housing especially), is it any surprise that lawyers report prenups are on the increase?
More in a moment on this, but it may help that – though the conversation probably seems tricky – it’s not an uncommon one.
What should go in a prenup
As I always say: just because you have found your funny match, doesn’t mean they’re also your money match.
Money is, in fact, the cause of 5% of divorces, according to analysis by Australian Family Lawyers.
The other primary reasons are:
domestic violence and coercive control (66%)
infidelity (65%)
sustained arguing and conflict (37%)
poor communication (27%)
Sometimes there are multiple factors, which is why that all adds to more than 100%.
In 2021, divorce rates hit an all-time high in Australia of 56,244 finalised, and there was a spike in applications too. The Australian Bureau of Statistics says this was due not just to the pandemic but to administrative changes that fast-tracked them, however 49,241 divorces were also granted by the Federal Circuit and Family Court of Australia in 2022.
The median duration of marriages – not including de facto splits is 12.8 years.
The median age at divorce is currently 46.7 for men and 43.7 for women.
A binding financial agreement should principally protect the assets a person brings to the relationship, and particularly so if there is one far wealthier party – it can set out that those assets will remain theirs.
It can also outline special arrangements if one person is likely to make more of a ‘contribution’ to the union throughout, bearing in mind that the law doesn’t view a contribution as just financial… caring for children counts as well.
If you sadly split later and don’t have a legal prenup, the assets of some de facto and all married couples will be ‘up for grabs’. This is the case whether held jointly or individually, and regardless of if they were acquired prior to, during or (sometimes) even after the relationship.
How to get a prenup – and have that tricky conversation
If you think having a hard conversation about how you would split your combined assets is difficult now – at a time when you love each other – imagine what it would be like if you fall out of love.
But what is the best way to approach this awkward and potentially emotional topic with your partner or soon-to-be spouse?
The advice is gently… and with appropriate justification.
“I’m worried about Mum and Dad’s gift of a house deposit.”
“It's just that I’ve been saving on my own for so many years.”
“What if we have a child and we stay unmarried: we need to put something in place to look after them.”
It can’t hurt to make it very clear: “I want to stay together forever.”
Then you both need to engage a lawyer for the agreement to be valid. The good news is that if you agree on the contents of the binding financial agreement, you will each get it for a set fee – roughly $5,000 to $10,000.
If not, you may incur further legal costs to get agreement.
Provided the ultimate binding financial agreement you sign (both parties must do this) is fair, reasonable and made without duress, it should give you watertight protection.
And it could end up the best ‘investment’ you ever make.
Go Deeper:
Financial Disclaimer
The information contained on this web page is of general nature only and has been prepared without taking into consideration your objectives, needs and financial situation. You should check with a financial professional before making any decisions. Any opinions expressed within an article are those of the author and do not specifically reflect the views of Compare Club Australia Pty Ltd.
