Do pre-nups exist in Australia, and do they work?

Do pre-nups exist in Australia? Contact Murdoch Lawyers today to know.

A question which often gets asked of family law practitioners is whether the “pre-nups” which pre-nup exist in the United States exist in Australia.

Under Australian law documents which would, in America, be considered “pre-nups” are known as financial agreements. Financial agreements can be entered into between two people either:

  • Before they are married (or enter into a defacto relationship);
  • During their marriage (or during their defacto relationship); or
  • After they have divorced (or after their defacto relationship has come to an end).

Financial agreements which are entered into at the end of a relationship obviously have far fewer risks associated with them as the subject matter and division of property is taking place immediately (as opposed to several years time, as is contemplated by “pre-nup style” financial agreements).

Financial agreements have been possible for quite some time under the family law legislation, however over recent years they have been given significant attention by the Federal Magistrates Court (as it then was), the Federal Circuit Court of Australia, and the Family Court of Australia (including the appellate division of that court).

For a period of time there was a somewhat troubling trend whereby financial agreements that parties had entered into either before they were married, or whilst they were married (but not separated) being set aside by the courts. The financial agreements were set aside for a variety of valid, but also somewhat technical issues.

The pendulum appears to have swung somewhat on this issue and courts are now more willing to hold people to agreements they entered into many years prior notwithstanding that at least one of the people who entered into the agreement is now unhappy with what the agreement provides for. Perhaps unsurprisingly, it is not until separation has occurred and it is time to implement the terms of the financial agreement that the unhappiness of one of the parties becomes known.

The preparedness of the court to hold people to what may be considered “bad deals” comes with a very large caveat. In order for a financial agreement which two people enter into in the early stages of their relationship to withstand a challenge which later arises, it is absolutely imperative that all of the legal steps and requirements are complied with in the creation and execution of the document.

Those requirements include, but aren’t limited to:

  • Each party obtaining independent legal advice as to the advantages and disadvantages, both financial and otherwise, of entering into the agreement,
  • Each party has before the agreement is signed, made full and frank disclosure of their financial circumstances.

A financial agreement which does not comply with all of the requisite steps may, in the fullness of time, be successfully challenged and set aside by a court. In short, financial agreements which are not prepared and drafted properly are, quite simply, not worth the paper they are written on.

For people who are entering into a marriage or a defacto relationship, particularly where one of the parties to the relationship is bringing significant assets with them, it may be prudent to give some consideration to entering into a Financial Agreement. Also if you anticipate receiving a significant inheritance or gift or interest-free loan from a family member or relative during your relationship that can also be protected under such agreement.

Under Australian law financial agreements work and are an effective tool to protect and clarify the position of two people in the event of separation, but this is provided they are prepared and drafted strictly in accordance with the law.

A properly drafted financial agreement prepared in the early stages of a relationship can ensure that, in the event of a separation, the risk of long, expensive and stressful litigation can be avoided.

Our accredited family law specialist Andrew Crooke is highly experienced in this field. If you are interested in learning more on these and related issues please contact the Family Law division at Murdoch Lawyers.

This publication has been carefully prepared, but it has been written in general terms and should be viewed as broad guidance only. It does not purport to be comprehensive or to render advice. No one should rely on the information contained in this publication without first obtaining professional advice relevant to their own specific situation.

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