Prenuptial agreements, often called the ‘prenup’ are often given a bad rap for being a romance killer or thought of as unnecessary for most people unless they have a lot of wealth, but truthfully, they are a very good thing to have.
Signing a prenup (called a binding financial agreement) in Australia is a good way to ensure that your financial wishes are made clear and in the event that your marriage comes to any end or the other person becomes deceased, they can save you a lot of headaches. So is a prenup something that you and your partner should consider before you go ahead and get married.
Read some of the benefits and drawbacks of these agreement below and find out what kind of relationships they’re most appropriate for.
Do you need a prenup?
What is a prenup?
A prenuptial agreement is basically a contract, which is legal binding. The contract is created for and signed by two people who are planning on entering into a marriage. These agreements usually outline a framework around how financial matters should be handled in the relationship in the event that the two parties separate.
It’s most common for areas like property, income, inheritance and any businesses owned by the partners to be set out in the contract. The agreement will usually cover how assets are to be split and will usually agree who receives what in the event of a marriage breakdown.
Other matters can also be outlined around marriage expectations although this is less common.
What are the benefits?
There are a lot of potential benefits to signing a prenup. In the event of a divorce it can help people to protect their interests and businesses, ensuring they maintain control. It can also put a limit on the amount of support than an ex-spouse can expect the other party to pay them post-divorce.
For people who have substantial amounts of wealth an agreement can be used to protect their financial interest. This kind of agreement can also be used to protect the inheritance of children who might exist outside of the marriage.
It can also set a clear tone from the very beginning of the marriage, showing peoples intentions from the beginning so that everyone can go into the marriage without concern.
What are the drawbacks?
There are some potential downsides to getting a prenup, although it will pretend on your perspective. It for instance could mean that you forfeit the right to spousal support that you may otherwise be entitled to under the law.
It also means that even if you contribute to your spouse’s business success, you might not be entitled to any part of that business success following the breakdown of your marriage. A lot of people also feel that starting off a marriage with a contract shows that you don’t trust your partner and isn’t very romantic.
A lot of people can get very offended if their partner suggests signing a contract as it can feel like they are indicating that they don’t trust their future spouse. Most importantly it’s not always possible to guarantee that an agreement entered into outside of the courtroom might be binding.
The contract can be challenged in court and they may decide that it is not binding. It’s important to ensure that you seek legal advice when drafting up the contract to ensure that it holds up in court.
What kind of relationship is an agreement good for?
Generally, it’s a good idea for practically any union but’s best for those with assets or interests to protect, like a business or a home.