What is a prenuptial agreement?
A prenuptial agreement, otherwise referred to as a prenup, is a contract that sets out how your property and assets will be divided if your relationship breaks down.
Prenuptial agreements can be made before, during or after the relationship - whether it’s a marriage or a de facto relationship. Some of the common assets and property that you can protect include:
- real estate
- family business
- a trust
- an entitlement to an inheritance
- pension entitlement
The idea of property also includes debts and liabilities of the relationship such as an obligation under a contract.
When you and your partner (or partner-to-be or ex-partner) agree how your property is to be divided, it is important to do it legally. With a prenup your assets and liabilities will be divided according to the terms of the agreement and prevents the Family Courts from becoming involved if your relationship does not work out.
The agreement must comply with strict legal requirements and you must have a certificate from a lawyer stating that you have received proper advice. If the agreement is not done legally it will not be upheld and you may have to fight things out in court anyway.
Many relationships do not go the distance - about 40% of marriages end in divorce and there’s nothing to suggest that de facto relationships fare any better. If this was to happen to you, having a prenuptial agreement could save you the stress of deciding who gets what.
When is a prenuptial agreement appropriate?
Prenuptial agreements may be appropriate where:
- one person has much more property than the other when the relationship began
- one person is, or may later become, entitled to an inheritance or gift
- you are moving into a second or subsequent relationship where children from former relationships might need to be protected financially, or
- you both simply want to make sure the terms of any property division are agreed up front and will not end up in court.
Does this apply to de facto relationships as well?
Any of these circumstances may arise in de facto relationships as well. Since 2009, virtually the same rules apply to de facto relationships as they do to marriages. Your relationship can be defined as de facto when you are living together on a genuine domestic basis yet are not married to each other or related by family.
Whether or not your relationship is de facto will be determined according to such matters as the length of the relationship, whether you live together, whether you have combined your finances and you have children together.
What if I don’t have a prenup? How do I go about reaching a settlement quickly and amicably?
If your relationship breaks down - whether de facto or marriage - and you do not have a prenup, it is important that you obtain legal advice on the rightful distribution of your property and your other rights and responsibilities.
If possible, it is best to stay out of court and to sort things out between you as amicably as possible. Negotiating a settlement with your former partner that you can both live with is likely to save you a lot of money, time and stress. Settling will be quicker, easier, cheaper and probably get you closer to what you want than a court decision will. Be sensible and compromise and seek out a lawyer who is solution-focussed and wants to find a positive and early outcome.
The legal process of separation can travel in all sorts of directions. Therefore, it is important that you know what your legal fees are going to be up front - be wary of signing an open-ended fee arrangement where you only find out how much the cost is after the matter has finished.