The COVID-19 lockdown has seen restrictions of movement across Australia. For some, it has been the perfect opportunity to get on top of life admin, including considering whether to get a pre-nuptial agreement.
Under the Family Law Act 1975, de facto couples have the same entitlements as married couples to seek a property settlement in the event of a relationship breakdown. A person is considered to be in a de facto relationship if the couple are not legally married, are not related by family, and having regard to all the circumstances of their relationship, they have a relationship as a couple living together on a genuine domestic basis. Married and de facto couples who have separated can apply to the Court for a property settlement.
The Court could make Orders regarding the division of assets and liabilities, including superannuation entitlements. The Court would be required to make Orders that are ‘just and equitable’ in all the circumstances, taking into account the property pool, contributions made by each of the parties and their future needs and financial resources.
As such, some couples choose to enter into a Binding Financial Agreement (otherwise known as a ‘prenuptial agreement’ or ‘pre-nup’) early in their relationship. These couples would prefer to avoid the uncertainty and cost of protracted negotiations and in some circumstances Court proceedings should they split up.
Those who may benefit from having a prenuptial agreement include people who:
have previously been married and who have significant assets;
are expecting to receive inheritances or gifts in the future;
have business interests, including with business partners; and
have significantly more assets than the other party.
Case Study
Aaron and Sam are in a committed relationship and have been renting together for the past 2 years. Sam recently received an inheritance from his late grandmother and is considering buying a house for him and Aaron to live in. Aaron has agreed to pay Sam ‘rent’ to help Sam cover the mortgage repayments. They share a joint bank account and share the cost of groceries and utilities equally. It is likely that Aaron and Sam are in a de facto relationship, and therefore can apply for a property settlement if they separate in the future.
Case Study
Sarah and Tom are engaged to be married. Both have properties held in their sole names but they intend to buy a property together to live in and start a family. They have discussed entering into a ‘pre-nup’ before their wedding. They both consider it fair for each to keep their respective properties acquired before the marriage, and to divide the equity in their joint property equally in the event their relationship ends.
Prior to entering into a Binding Financial Agreement, both parties must obtain independent legal advice. The lawyers must explain to their clients the effect of the agreement on their rights, as well as the advantages and disadvantages of the client making the agreement.
Drafting Binding Financial Agreements require drafting expertise to minimise the chances of the Agreement being challenged by a Court. If not properly drafted, a Binding Financial Agreement may not be binding and can be set aside by the Court in some circumstances. It is recommended that you seek advice from a specialist family lawyer if you are considering entering into a Binding Financial Agreement.
You and your partner must also be satisfied that you have provided each other with full and frank financial disclosure of your financial circumstances. This involves exchanging information about sources of income, ownership of assets and liabilities and other financial resources.
For those who are intending to move in together, or who are already living together on a genuine domestic basis, now may be the perfect time to obtain legal advice about how to protect your wealth in the event of a relationship breakdown.
You can get started by booking a free chat with one of our family lawyers or providing instructions here.