What is a prenuptial agreement?

7 December 2022 in Family and Divorce Law | 3 min read | skip to FAQs

A prenuptial agreement (commonly known as a “prenup”) is a kind of binding financial agreement (BFA) that allows parties to pre-determine financial and property issues in the event of a relationship’s breakdown. The terms are colloquially interchangeable and we use these terms interchangeably in this article.

Prenups (or BFAs) can give the parties involved peace of mind and a way to avoid the expense, worry and time involved in litigating financial disputes with a former partner. Prenuptial agreements can be entered into before, during or after the breakdown of a relationship between legal adults (18 years or older). They must be in writing, signed by both parties and express that the agreement is being made under the relevant section of the Family Law Act 1975 (Cth). (FLA)

Both parties must obtain independent legal advice and provide proof that they have done so. They must also provide complete information about their financial situation, including assets, debts and income.

What does a prenuptial agreement cover?

A prenup covers assets amassed during and prior to a relationship. These assets can include:

1. Money
2. Property
3. Inheritances
4. Businesses
5. Superannuation
6. Investments

Prenups can also determine other financial issues, such as the payment of debts and liabilities and spousal and child maintenance.

Do I need a prenup?

Prenups are not only for the very wealthy. There are many reasons for entering into a BFA with your partner. Whether a prenuptial agreement is suitable for you will depend on your unique circumstances.

Some reasons why parties may want to enter a BFA include:

1. Where one party has substantial assets acquired prior to the relationship that they wish to protect, such as property, inheritances and investments.
2. Where a party wants to protect the financial interests of relevant companies and trusts.
3. Where parties want to avoid the stress, expense and emotional strain surrounding finances should the relationship end. A BFA provides a well defined and pre-agreed division of finances.
4. Where one party has pre-existing debts that the other party doesn’t wish to be responsible for.
5. Providing certainty for the preservation of assets of children from previous relationships.
6. Providing certainty for spousal maintenance.
7. Providing certainty for care and maintenance of children born prior and during the marriage.

It can be challenging to decide whether a prenup is appropriate for your situation. The experienced family lawyers at Brander Smith McKnight can help you understand your position and provide accurate legal advice to ensure that you make the right decision.

Children and Prenuptial Agreements

The primary purpose of a BFA is the formal agreement regarding the split of assets pool should the relationship breaks down. Section 90E of the Family Law Act 1975 (Cth) states that an existing child can receive financial support if the relationship breaks down. However, the details of the child and the exact amount of maintenance must be included in the BFA.

It is prudent to include financial arrangements for any children that may be born after the signing of the prenuptial agreement. This is because if the agreement did not include the birth and care of those children, the court may set aside the BFA if one partner would suffer hardship due to the responsibility of caring for the children. This is pursuant to section 90K, subsection d of the Family Law Act 1975 (Cth).

If the BFA didn’t specifically mention the birth and care of children born during the relationship, there is another option when a child is born during the marriage. The BFA can be amended and resigned after the birth. This is then called a financial agreement during marriage, and is pursuant to section 90C of the FLA. (In contrast to financial agreements made before marriage which are pursuant to section 90B of the  FLA).

Are prenuptial agreements legally binding?

Prenuptial agreements are enforceable provided that all prerequisites have been satisfied, as outlined under section 90B of the Family Law Act. There are situations where a prenup can be challenged and set aside, however. ​​Some situations where the Federal Circuit and Family Court of Australia can set aside a prenup include:

1. If the agreement was obtained by fraud;
2. If the agreement was entered into for the purpose of defrauding or defeating a creditor;
3. If the agreement is void, voidable or unenforceable;
4. If a party to the agreement engaged in unconscionable conduct in relation to the making of it and
5. If since the making of the agreement there has been a material change in circumstances relating to the children of the relationship.

Setting Aside or Terminating a BFA

In simple terms, there are a number of circumstances where an agreement can be set aside.

1. If the agreement was obtained by fraud, such as non-disclosure of a parties financial situation.
2. If the agreement was entered into for the purpose of defrauding or defeating a creditor.
3. If the agreement is void, voidable or unenforceable, such as the parties not receiving independent legal advice
4. If a party to the agreement engaged in unconscionable conduct in relation to the making of it, such as signing the BFA on the wedding day.
5. Since the making of the agreement, there has been a material change in circumstances relating to children of the relationship and this causes hardship.

The family lawyers at Brander Smith McKnight can help you terminate a binding financial agreement. This can be achieved either by an agreement or by a court order.

How can BSM Sydney Lawyers assist you?

The experienced family lawyers at Brander Smith McKnight can assist with drafting a prenuptial agreement that is comprehensive, legally effective and properly reflects your intentions. We can review an already drafted prenuptial agreement to ensure that your best interests are served and negotiate the terms of a prenuptial so that you are protected against onerous terms. Our senior family lawyers provide a free 20 minute consultation to assess your individual case.

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