What can you do to maximise the enforceability of your Binding Financial Agreement, commonly known as a prenup, postnup or cohabitation agreement?
Binding Financial Agreements can provide couples with greater certainty about their financial arrangements. However, no type of contract is 100% enforceable 100% of the time.
In today’s video, I’ll be collectively referring to Binding Financial Agreements entered into before or during a marriage or de facto relationship as “prenups”.
Here are six practical considerations that may help reduce the risk of your prenup being challenged or set aside by a court.
Key Points for a More Enforceable Prenup
- Obtain independent legal advice before signing the agreement.
- Provide full and frank financial disclosure.
- Consider the timing, emotions and surrounding circumstances.
- Account for potential changes in circumstances.
- Aim for fairness and reasonableness.
- Review the agreement periodically.
1. Get Independent Legal Advice
To comply with the strict requirements for Binding Financial Agreements under the Family Law Act 1975, both parties must receive independent legal advice before signing a prenup and obtain a certificate from their lawyer, which is included in the agreement.
Independent legal advice gives each party the opportunity to carefully consider the agreement, including the advantages and disadvantages of entering into the prenup before it is finalised.
2. Provide Full and Frank Financial Disclosure
Both parties must fully and honestly disclose their financial situation.
A failure to provide full and frank financial disclosure may result in a prenup being set aside. It is therefore important to be open and transparent about your financial circumstances.
3. Consider Your Emotions and Surrounding Circumstances
Prenups must be entered into voluntarily, without coercion or undue influence.
Discussing finances and potential separation can be emotionally challenging for some couples. It is therefore important to consider the timing of the prenup and avoid rushing the process.
For example, if your wedding date is fast approaching, trying to negotiate and sign a prenup under significant time pressure could create circumstances that may affect the agreement if it is challenged in the future.
4. Remember That There Are Many Variables to Consider
Prenups often require complex drafting because they attempt to address future changes in circumstances and a multitude of variables as comprehensively as possible.
Keep in mind that life is often unpredictable. Not every potential scenario can be foreseen when an agreement is drafted.
This is why it is important to consider your current circumstances as well as potential changes that could occur throughout the relationship.
5. Aim for Fairness and Reasonableness
Be mindful of any power imbalances in the relationship and consider whether these can be appropriately addressed.
A prenup that is heavily skewed in one party’s favour may be subject to greater scrutiny and could be open to future challenges.
It is important to obtain independent legal advice about whether the proposed terms are appropriate for your circumstances rather than assuming that an agreement will be enforceable simply because both parties have signed it.
6. Review Your Binding Financial Agreement Regularly
It is advisable to review your prenup periodically to ensure it still meets the couple’s needs.
A prenup can be updated or varied with the consent of both parties if the relevant legal requirements are followed.
Are Binding Financial Agreements Worth Having?
Prenups can provide couples with greater certainty and may help establish how financial matters will be dealt with if the relationship breaks down.
However, a Binding Financial Agreement needs to meet the relevant legal requirements to have the intended effect. The circumstances surrounding how the agreement was negotiated and entered into can also be important.
If you are considering entering into a prenup, it is important to obtain independent legal advice before signing the agreement.
Contact us at LEDA Lawyers if you are considering entering into a prenup or if you need advice about reviewing an existing Binding Financial Agreement.