5 notable reasons to get a prenuptial agreement in Australia

In this article, we will delve into the details of prenuptial agreements in Australia, and why they may be a wise choice for couples seeking to secure their financial future. Whether you’re considering one or simply curious about this important legal tool, this article will provide valuable information and insights. Keep reading to learn more.

By Samira Friis, Associate at Watts McCray, Sydney

What is a prenuptial agreement in Australia?

A prenuptial agreement in Australia is also known commonly as a Binding Financial Agreement or BFA for short. BFAs have become increasingly popular in Australia as a way for married or de facto couples to take control of their financial future and protect their assets (including pets).

A Binding Financial Agreement is a private agreement between couples (married or de facto) about how property and finances will be divided in the event of a relationship breakdown.

BFAs can be entered into:

• before the commencement of a de facto relationship or marriage;
• during the de facto relationship or marriage (postnuptial agreement); or
• after it has broken down – a binding financial agreement after separation.

So how can a BFA provide financial empowerment? We’ve listed 5 important ways in which prenups will benefit couples.

1. Asset protection strategy

Entering into a prenup agreement or BFA at the start of or during a relationship (prior to a relationship breakdown) can be used as part of an overall asset protection strategy, especially if:

• You own or part-own a business;
• You have received or are likely to receive a large inheritance;
• You expect your income to increase substantially;
• You have already been through a long and protracted property settlement dispute from a previous relationship;
• You are much wealthier than your partner. A BFA can protect pre-existing assets from claims by the other party to the relationship, which is particularly relevant and important when one party is in a superior financial position to the other; and
• You have children from a previous marriage and you wish to ensure your children are provided for, regardless of what happens to your relationship. When combined with effective estate planning, a BFA can ensure that property passes through generations as you intend it to.

Binding Financial Agreements can look into the future and dictate how joint property can be acquired, financially maintained and dealt with if separation occurs.

2. Peace of mind

A BFA will enable you and your partner to have your own agreed rules in place about the financial aspects of your relationship, made in happier times, which often results in an agreement which is more likely to be considered by all parties to be fair and reasonable.

BFAs can provide significant comfort to parties before any relationship issues arise. The Family Law Courts do not set agreements aside, merely because they are unfair. There must be conduct such as:

• fraud;
• duress;
• unconscionable conduct or material non-disclosure; or
• other circumstances described in the legislation, before a Court will consider intervening in the agreement reached.

Even death of a party does not impede the operation of a BFA and it will continue to be binding on that person’s representative, if separation has occurred before death.

3. Tax benefits of prenuptial agreements in Australia

Prenuptial agreements in Australia afford parties the same significant tax benefits as Family Court orders. Parties enjoy the benefit of stamp duty concessions and Capital Gains Tax rollover benefits, in circumstances where they would ordinarily apply should a property settlement be finalised by court orders. These tax benefits do not apply if parties divide property by way of a private or informal agreement.

4. Avoiding court proceedings

Post-separation property settlement negotiations are often more cost-effective and timely, if a BFA is in place. By entering into a BFA, you can avoid significant financial and emotional costs associated with legal proceedings through the Family Court.

Protracted litigation is often significantly more costly than the preparation of a BFA. In most cases, the preparation and execution of a BFA can be achieved within a month or two, if both parties are in agreement. Of course, this depends on the complexity of the parties’ finances and the nature of negotiation. Conversely, engaging in Family Court proceedings and or dispute resolution can take years to reach determination despite the new Federal Circuit and Family Court Rules and Practice Guidelines, and the best efforts of all involved.

5. Privacy

In the process of entering into a BFA, only you, your partner and your lawyers need to be involved in negotiating the terms of a BFA. In contrast, members of the public and even other litigants can observe Family Law hearings. The Family Court often hears from family, friends and independent experts who appear as witnesses.

Want to learn more about prenuptial agreements in Australia?

Having a prenuptial agreement in Australia (BFA) is a smart way for couples to plan for their financial future and protect their assets. To ensure that the agreement is binding and enforceable, it’s important to follow the guidelines set by the Family Law Act, including seeking advice from a qualified legal professional.

At our law firm, we have a team of expert family lawyers who can help guide you through the process. If you’re interested in learning more about BFAs and how they can benefit you, don’t hesitate to reach out to us. Our friendly team is always here to help and answer any questions you may have. Simply fill out the form below to get started.