For some couples, the thought of entering into a Financial Agreement and/or a Prenuptial Agreement (commonly known as a ‘prenup’) goes against the very idea of having a trustworthy, loving or romantic relationship in the future; after all, you are with your partner because you are in love and hope to spend the rest of your life with them – what could be less romantic than asking them to sign a document setting out how you will divide your assets if you separate?
However, for many couples, entering into a Financial Agreement can offer (and their wider family) asset protection and can limit the opportunity for litigation and legal costs in the future, should a separation occur – which in turn offers them peace of mind. It can also be a symbol to one or both partners about the importance of the relationship over the importance of the financial implications of the relationship upon separation.
What comes as a surprise to many couples is that while a Prenuptial Agreement must be entered into before the marriage occurs, there are many different types of Financial Agreements that can be entered into at different stages of a relationship – for example, before a couple starts living together, after their cohabitation or marriage has begun or after their de facto relationship or marriage has ended.
In Australia, we are experiencing a declining divorce rate as a result of the decrease in the rate of marriage and a wider acceptance and uptake of cohabitation or de facto relationships. Whatever style of relationship you are in, the potential for a breakdown in that relationship exists. This article looks at whether you should consider entering into a Financial or Prenuptial Agreement – one that could be applied to a marriage or de facto relationship.
Growth of prenuptial agreements in Australia
Interest in Financial Agreements and/or ‘prenups’ has grown over the last decade in Australia.
Australia – along with many other places in the world – have also seen a rise in prospective family members such as in-laws enquiring about prenups. In this world of increasing house prices, many in laws may contribute to house deposits and naturally it is of financial concern to them.
While the interest in Financial Agreements and/or Prenuptial Agreements is on the rise, some couples enquiries about the agreements ultimately end at the enquiry stage given the seemingly “clinical” legal nature of the agreements – that is, the strict legal requirements solicitors must ensure have been met before an agreement has been entered into and the costs associated with doing so.
To Prenup or Not?
So, the question is whether you should consider a Financial or Prenuptial Agreement. While family lawyers, who time and time again watch many of their clients experience the stress and costs of litigation in a family law context post-separation, are often big advocates of Financial Agreements, perhaps the biggest advocates of Financial or Prenuptial Agreements are those people have experienced family law litigation firsthand – and wish that there was some way the litigation could have been avoided.
We hope that we will live long and prosperous lives, yet pay premiums should we not. We regularly pay for insurance should we die or become permanently injured or incapacitated and we write Wills to determine what will happen to our assets if we die.
If one can think of a Financial or Prenuptial Agreement in the same terms – that is, as a necessary action to protect against a potential unknown and undesired outcome, the stigma around these types of agreements will in all likelihood decline, along with the number of family law litigants who enter into the court system post-separation.
Life does have a need to address some finalities which are certain or have a potential to happen.
Financial or Prenuptial Agreements currently raise a lot of emotional issues for couples about both the level of trust and/or the future intentions of one or both parties – however, the realisation and acceptance that they are in place to protect both parties should be promoted and encouraged.
Equally, dissociation from the “Hollywood” reporting of celebrity prenups – where one famed celebrity is slated for stitching up the other famed celebrity – should be encouraged.
Financial or Prenuptial Agreements (prenups) are not going to be suited to all; that much is clear. However, if couples can leave the unpalatable aspects to one side and look at it from a practicality perspective, prenuptial agreements can lay down the framework and foundations for a more peaceful separation should that need arise.
After all, when you are at your lowest point emotionally, the last thing you want to be arguing about is what percentile each of you contributed to a deposit on the house or other such wranglings.
To learn more about Financial or Prenuptial Agreements, see the Prenuptial, Financial and Relationship Agreements section of our website.