A prenup is a binding agreement about how assets will be divided in the event of a marriage or de facto relationship breaking down. These documents can be challenged when a divorce occurs, especially if the agreement was made many years in the past. Because they are open to challenge, it is important to get a good prenup lawyer to help you to draft the document.

Prenuptial agreements are particularly important in a number of circumstances:

  • In the case of a second marriage, when there are children of a prior relationship who need financial protection
  • When one partner in a de facto relationship moves into property owned by the other partner
  • When one partner brings significantly greater property into the relationship
  • When a partner wants to protect an expected inheritance or family business
  • When the couple are simply agreed that, in the event of a break up, there will be an amicable out of court property division.

However, around 40% of marriages end in divorce in modern Australia, so documenting finances and coming to an agreement about a fair division in the event of a break up makes sense for everyone.

Agreements that purely revolve around finances are usually enforced by the courts, especially if circumstances have not substantially changed between the signing of the document and a divorce.

In the famous “pole dancer case” for example, a middle aged multimillionaire met a penniless adult entertainer and fell in love, whereupon he divorced his wife (who got $7 million in the property settlement).

He became engaged to the dancer and decided he didn’t want to risk too much of his wealth, so the new couple had a prenup lawyer draw up an agreement whereby he would pay her $3.25 million if they divorced within four years.

Predictably, the marriage lasted less than two. When the husband tried to get the prenup overturned, on the grounds that she had never loved him and only wanted his money, the family court decided the document was clear and valid enough that it should be upheld.

There are a number of situations in which a prenuptial agreement will be overturned by a court, however. Frequently, people try to put “lifestyle clauses” in the document, which are completely unenforceable.

A common example is when couples try to make special provisions in the event of infidelity – however the law is not concerned about why a divorce occurs, and a court will overturn the document and divide assets based on the “no-fault” formula.

There are also some crazier examples, where people have tried to include clauses regulating weight gain and the frequency of sexual intercourse. There have even been instances where a prenup has had a clause demanding that the wife get an abortion should she fall pregnant.

None of these requirements are enforceable, and the inclusion of them will often invalidate the financial element of the document as well.

The Family Law act which makes provisions for prenups (legally known as a “binding financial agreement”) requires each party to have independent and adequate legal advice before they sign the document. It also states that the signing cannot be made under duress by either spouse.

This has been interpreted to mean that one party cannot announce that their partner needs to sign or the wedding is off immediately before the ceremony.

Apart from the inability of the other spouse to get their own legal advice in the timeframe, threatening to call off the wedding has been seen by the family court as an example of duress, and taking advantage of the partner with less negotiating power.

A financial agreement can be signed at any point during the relationship, so calling it a “prenup” is something of a misnomer. The partner who the assets are being protected from will probably be more reluctant to sign the agreement after the wedding, however.

It is also important that the document should cover assets gained (and lost) through the course of the relationship, as well as those that are brought into the marriage. This aspect of the agreement is often neglected, even though over the course of a marriage financial states can change tremendously.

Prenuptials can be very useful when it comes to protecting assets in the event of a divorce, especially when one partner comes into the relationship with children already. They are also far cheaper to procure than a protracted property settlement would be, so the overall asset pool will be less diminished after a divorce.

When they are drafted properly, are clear in the provisions made and are reasonably fair to both spouses then they are almost always upheld by the court. This means that it is very important for a good prenup lawyer to draw up the document and for both parties to get good, independent advice.

Incredible Planet Staff

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