*The information contained in this page, and throughout this website, is general in nature. It is current at 30 June 2019 but may have been subject to change since that time. It is not intended to be, and should not be construed as, legal advice. Every case is different and there may be factors which affect the outcome or advice in your particular case. We recommend that you contact us before taking any steps regarding the issues raised in this website.

 

Forward Planning / Prenuptial agreements

There are many ways in which assets can be safe-guarded against potential future family law claims. All of these methods require a party, or parties, to be proactive.

What is a pre-nuptial agreement?

Strictly speaking, a pre-nuptial agreement is a binding financial agreement entered into between parties before they are married, which deals with the way in which their finances are to be divided if and when the marriage comes to an end. In Australia though, pre-nuptial agreements can also be used by parties before entering into a de facto relationship.

When is a pre-nuptial agreement appropriate or useful?

Prenuptial agreements can be useful for any couple deciding to marry or enter into a de facto relationship. They would typically spell out how the finances are to be arranged if that relationship breaks down, meaning both parties are entering the relationship with their ‘eyes wide open’, which minimises the potential for arguments and litigation.

Cases where pre-nuptial agreements are particularly useful as part of a plan to protect assets include:

  • Cases involving a family business or family farm, particularly if there are third parties involved such as other family members or business partners;

  • Where one party has significantly more assets than the other at the beginning of the relationship;

  • Where one party is expecting a significant gift or inheritance that is not necessarily intended to benefit both parties; and

  • Where there is a desire that particular assets are ‘kept in the family’, such as valuable heirlooms, property, or entities.

 

How effective are pre-nuptial agreements in Australia?

For over a decade, there has been debate about how effective pre-nuptial agreements are in Australia. There are provisions in the legislation which give the Court power to find that they are not binding, or to set them aside, in certain circumstances such as where there is a material non-disclosure, where a party has engaged in unconscionable conduct, or where a party was under duress. Like most family law powers, these are discretionary in nature and are sometimes difficult to predict.

In our view, the best way to look at a pre-nuptial agreement is not as being ‘water tight’, but as a ‘hurdle’ a party would have to get over before they could make a claim. They are not perfect, but they are the best tool we have, and are very effective if used as part of an overall strategy to protect assets.

What is the process of entering into a pre-nuptial agreement?

To enter into a pre-nuptial agreement, both parties must have independent legal advice. Typically, one party will approach their lawyer to ask them to prepare the agreement. The other side then takes the agreement to their own, independent lawyer, who can advise them in relation to it. There are usually amendments which are negotiated but once the agreement is settled upon:

  • Each party needs to sign the agreement in the presence of a witness; and

  • Each party’s lawyer needs to sign a certificate confirming they have given their client advice in relation to the advantages and disadvantages of the agreement.

 

Does anything need to be done after the pre-nuptial agreement is entered into?

Once the pre-nup is signed, each party should keep a copy. While the document may never be used unless you separate, you should bear it in mind whenever you enter into any major financial transactions.

We usually recommend that you provide a copy of the agreement to your accountant, financial adviser, and any other professionals who assist you in dealing with your assets. We also recommend that you review the agreement every 5 years or prior to entering into any major transactions. If you enter into major transactions without having regard to the agreement, there could be significant unintended consequences.

Can we enter into a pre-nuptial agreement after we are married?

You can enter into a financial agreement at any time, even after you have separated. Financial agreements are one of two ways of documenting a financial settlement (the other being by way of consent orders). The obvious difference with entering into a financial agreement after marriage, is the change in the negotiating landscape.

What other options are available to protect assets?

There are a host of other mechanisms that can be used to protect assets either instead of, or in addition to, a pre-nuptial agreement or other financial agreement. Such arrangements include setting up trusts and/or companies to hold assets, entering into loan arrangements or leases, and using security including caveats and/or mortgages.

There are a host of other considerations which need to be taken into account though including tax, stamp duty, and other administrative costs. When devising an asset protection plan we would typically work with your accountant and/or financial planner to identify the most effective and efficient way to achieve the desired outcome.

If you have any questions regarding the issues mentioned above, or family law in general, we’re here to help. Please feel free to contact us to discuss your case and make an appointment to meet with us.

 

Telephone
(08) 6117 0460

Email
info@fmdlegal.com.au

Our Hours
Mon - Fri 8.30 – 5.00
After Hours by appointment

Address
Level 16, 251 Adelaide Terrace
Perth,  WA 6000

Postal Address
PO Box Z5232
St Georges Tce
Perth WA 6000