Prenups in Australia – what do you need to know?

Written by Annette Sampson for Australian Seniors.

Celebrities have famously included everything in theirs from “no cheat” clauses to baby bonuses. We’re talking about prenuptial agreements, and serious money can be at stake. Hollywood stars Catherine Zeta-Jones and Michael Douglas are happily together now, but should that change, the actress will get a reported US$2.8 million for every year she stayed in the marriage.

But prenups are not just for the rich and famous. Increasingly, ordinary couples, especially those who are more mature, are looking to control the fallout from a relationship breakdown later on.

“Older couples should 100% consider agreements,” says Tuskeen Jacobs, a partner and family law specialist with Rostron Carlyle Rojas Lawyers. “They are typically entering into second marriages or long-term relationships where there may be an imbalance of wealth, and children, from earlier relationships. They want to protect themselves and future generations.”

What is a prenup?

In Australia, prenups are legally known as Binding Financial Agreements (BFAs). They are drafted at the beginning of a relationship to set out how assets will be divided if a couple break up in the future.

Tuskeen says they can be used in de facto relationships as well as marriages. In 2009, the Family Law Act was also amended to include a wide definition of de facto relationships, which means you may not have to be living with someone full-time to be covered.

“If you are in a committed relationship for two years or more where there is intermingling of finances of any kind and you’re spending a couple of nights a week together, you can be regarded as in a de facto relationship,” she says.

How do they work?

The standard premise of a BFA is that what’s yours is yours, what’s mine is mine, and whatever we acquire during the relationship is split 50/50, Tuskeen says. However, you can decide on your own arrangements, so long as you both agree to them. “BFAs are purely financial and set out how to divide the assets,” she adds.

Are they legally binding?

The Family Court can set aside a BFA in limited cases such as fraud or one party signing under duress, says Tuskeen. But the court will generally try to uphold the agreement. To limit the potential for future problems, both partners are required to obtain independent legal advice before signing, and the lawyers must sign the agreement to say that they have provided this advice.

What does a prenup cost?

Tuskeen says a basic agreement starts at around $5,000 and can run to $15,000 or more. The need for both parties to obtain legal advice means they don’t come cheap, but she says the cost is small compared to the costs of going to court to divide the assets later on.

But aren’t prenups unromantic?

While conversations about breaking up while you are still in the early stages of a relationship can be awkward, Tuskeen says there is generally less resistance among older couples, as many have been through a divorce or the break-up of a long-term relationship before and can see the advantages.

What if circumstances change later?

Tuskeen explains there are mechanisms to allow reviews or replacement by new agreements, but BFAs are designed to last as long as the relationship. She says the start of a relationship is actually the ideal time to negotiate, as both partners are going into the negotiations with high expectations of a happy life together. “It is when people are generally at their fairest.”