VIDEO TRANSCRIPT:
Are Pre-nuptial agreements (which are legally known as Binding Financial Agreements) worth the paper they’re written on?
It’s a question that we often hear and it’s due to the common misconception that Pre-nuptial Agreements are easily challenged and overturned in Court – so why go the expense and hassle of having one drafted in the first place? The short answer is – it depends on your Pre-nup. This video will outline the range of possible outcomes to help you decide if a Pre-nup is right for you.
Scenario 1: Pre-nups must be drafted according to very strict legal requirements under the Family Law Act 1975 to make them valid and enforceable. In the worst-case scenario, if the pre-nup has been incorrectly drafted and does not meet the requirements of the Family Law Act, it is invalid and can be overturned (or “set aside”) by a court.
Scenario 2: If a pre-nup has been correctly drafted in accordance with the Family Law Act, including that each party has obtained Independent Legal Advice prior to signing the pre-nup, then the pre-nup is legally enforceable.
Scenario 3: However, another possibility is that the pre-nup is challenged on grounds such as fraud, duress or undue influence. This would need to be proved in court for the pre-nup to be set aside.
Scenario 4: A validly drafted pre-nup may be found to be partially enforceable. For example, perhaps most of the terms of the pre-nup must be followed but there is a clause allocating assets based on the ‘lifestyle’ or the behaviour of either partner which is not enforceable under Australian law. That clause could potentially be severed or removed from the pre-nup.
Scenario 5: Another example of this sort of situation is where a pre-nup does not address future needs if there are children of the relationship, and to follow the terms of the pre-nup would result in hardship for the children or one of the parents – the pre-nup may be set aside partially or entirely in that case.
Scenario 6: If your pre-nup has been validly drafted, and there are no other factors at play such as duress, hardship, etc. then your pre-nup is valid and must be complied with.
Remember that pre-nup’s are just another type of contract. We enter into all sorts of contracts on a daily basis, from ordering a coffee to buying a house. Are all contracts watertight? No – but that doesn’t mean that we don’t enter into them just because they might be challenged. It’s always better to have something to fall back on, or a baseline from which to move forward, because there is already an agreement in place (whether you enter into a pre-nup before or during a marriage or de facto relationship). At the very least, having a pre-nup in place before separation can act as a deterrent for somebody who does not want to cooperate with you and comply with the agreement after separation – the non-breaching party can take the breaching party to court to make them comply with the terms of the pre-nup. Ideally, you will have an agreement in place that will relieve you from the stress, cost and time of trying to negotiate with your ex after separation and hopefully save you the pain of having the matter dragged into court.
Contact us at LEDA Lawyers if you are considering entering into a pre-nup or you need to review an existing one.