What is a Prenuptial Agreement?
A prenuptial agreement (also spelled with hyphenation as "pre-nuptial agreement", or known colloquially as a "prenup") is a written agreement, entered into prior to marriage, detailing how marital assets should be divided in the event of a breakdown in the marriage relationship.
It is a common question for clients to ask whether prenuptial agreements are permitted under Australian family law. The short answer is yes, although in Australia we usually refer to them as "financial agreements" or "binding financial agreements". An Australian financial agreement can also be broader in application that a a traditional prenuptial agreement (noting the the term "nuptial" refers to a marriage or wedding). Under the Family Law Act, binding financial agreements can apply equally to both marriages and defacto relationships. Binding Financial Agreements can also be entered into at any time (ie. before, during or after the marriage or defacto relationship).
Another frequent question asked by clients is whether an Australian prenuptial agreement, or binding financial agreement, is legally enforceable. The answer to that question is yes. It is a common misconception that prenuptial agreements in Australia are unreliable, not enforceable or otherwise "not worth the paper they are printed on". A properly drafted and executed financial agreement will oust the jurisdiction of the Federal Circuit and Family Court of Australia to make any orders regarding the division of assets. However, the financial agreement is enforceable by the court (as if it were an order made by the court itself).
Should I make a Prenuptial Agreement?
According to the Australian Bureau of Statistics, there were 49,510 divorces granted in Australia during 2020. The median length of marriage to separation was 8 years (for those couples who ultimately divorce). Another commonly quoted statistic is that one third of first marriages in Australia end in divorce, and half of second and subsequent marriages end up in divorce. For defacto couples, the chance of relationship breakdown is even worse, being six times more likely to end in separation.
While no one enters into a relationship with the expectation that it will fail, it makes sense to consider what should happen in the event things do not go as planned. Entering into a prenuptial binding financial agreement allows parties to reach a just and equitable agreement at a time when both parties love and respect each other. This is preferable to the often emotional and bitter warfare that follows after a breakdown in relationship. A financial agreement could also save tens of thousands of dollars in future legal and court fees. For those reasons, considering a prenuptial binding financial agreement is recommendation for anyone considering marriage or entry in a defacto relationship.