Prenuptial agreements, also known as ‘Binding Financial Agreements‘ in Australia, are a delicate and frequently misunderstood topic. Some people mistakenly believe that these types of Financial Agreements indicate that a relationship is in trouble, although this is rarely the case.
People get life insurance not because they anticipate dying soon, but because they want to make sure their finances are in order if the worst happens. In the same manner, people construct Wills, etc to ensure things today can be taken care of for tomorrow. Financial agreements that are legally binding are no exception.
While these agreements are frequently subject to plenty of media attention usually with people signing prenups to protect their billions, in real life many couples with wide-ranging asset pools consider prenups as an insurance policy if things go wrong. But what you must know is that prenups or their correct legal name, “Binding Financial Agreements (BFA)” are a very useful tool for financial planning that can be entered into by everyday people before, during, or even after a relationship, regardless of whether or not a couple intends to marry. That’s right, De Facto relationships are commonplace for prenups.
Marriage isn’t for everyone, let’s face it. The good news is that Australian law does not distinguish between married and non-married couples. The bad news is that this can lead to people not comprehending the financial consequences of dating someone long-term, especially if it becomes serious.
While they are created under distinct provisions of the Family Law Act, Binding Financial Agreements for de facto relationships provide the same level of flexibility and protection as those for marriage.
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To dispel some of the myths surrounding the subject, here are five compelling reasons to contemplate a de facto prenuptial agreement based on Australian law:
Sign a de facto prenuptial agreement to cement your relationship.
Couples generally make these de facto ‘prenups’ in the hope that they will never have to use them. Couples, on the other hand, build a firm foundation on which to grow and nurture their relationship by obtaining one.
By eliminating the pressures that both parties may feel to safeguard their finances before entering into a de facto relationship, both parties are free to throw caution to the wind and totally immerse themselves in the relationship.
These Agreements can give people already in a de facto relationship peace of mind regarding what would happen if the relationship were to end in the future, which can be soothing no matter how strong the connection is.
Keep your children safe.
Those who had children from a previous relationship may find it challenging to enter into a new de facto relationship. Many parents’ first reaction is to safeguard their children and ensure that they are well-taken care of. Anyone who has gone through the court system after a divorce can attest to how draining the process can be emotionally and financially.
In the sad event that the relationship fails, parents can protect themselves by entering into a de facto ‘prenup’.
They (and their children) will not have to go through the Court process again, and their assets will not be further depleted.
Keep your pets safe.
While many of us consider our pets to be members of the family, pets are considered property under the Family Law Act, and the Court will not grant joint custody orders.
In a de facto partnership, purchasing a four-legged friend is frequently a significant step. De facto prenuptial agreements can give couples piece of mind in the case of a breakup. If properly phrased, they can also be highly flexible.
Pets are a Big Part of the Family.
Use a de facto prenuptial agreement to protect your assets.
Even if you don’t have much when you enter into a de facto prenup, these agreements can cover future assets. As a result, they’re an effective strategy for safeguarding any future inheritances you may receive.
This is especially essential for some people because any objects inherited from a loved one frequently have a strong, emotive attachment.
Taking care of your spouse
Spouse party maintenance, or “alimony” as it is known in America, can be sought by parties following the termination of a de facto relationship in Australia, competing with prenups for the most frequently misunderstood area of law. The Court’s test is basic in that it requires that one side must require such assistance, and the other party must be able to pay for it.
De facto couples can effectively contract out of their ability to claim spousal maintenance from one other by signing a prenuptial agreement, as long as neither party was relying on an income-tested pension at the time the agreement was signed.
That’s all there is to it. These are five compelling reasons why de facto prenuptial agreements are beneficial to all couples, not just those married
Here are some other commonly asked questions.
What are some of the benefits of BFA?
A BFA acts as a safety net, preventing any existing or future problems about property division and spousal maintenance following a divorce or separation. It will explain the partners’ financial rights. It has the power to determine how joint property can be obtained or maintained, as well as how they are allocated in the event of a divorce. It can shield you from your spouse’s financial obligations. A BFA can help clarify property distribution in a mixed household. Finally, they will know ahead of time how their property and finances will be split properly in the case of a divorce or separation. For transactions including a BFA, stamp duty and capital gains tax savings are available.
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What are the drawbacks of obtaining a BFA?
Even with a BFA, there may be certain disadvantages due to the ambiguities, as the BFA can be set aside by a court in certain circumstances. In entering into a BFA, the court has no monitoring or regulatory function. The BFA can be unfair for one party if the parties do not pay attention to it during the drafting stage.
Is the financial situation taken into account by the court at the time of separation or at the time of the order?
The financial conditions of the parties are considered by the court at the time the decree is made, not at the time of your separation. You may suffer unintended financial penalties if you have not finalised your property settlement by a court order or a BFA. Consider winning the lotto or receiving a redundancy payment after you’ve divorced but before the financial arrangement is finalised by the court. Similarly, a setback could occur, such as one party losing their job or becoming injured and unable to work?
Is legal advice required for a BFA?
Yes. Despite the fact that this is a private agreement that does not require judicial approval, the parties should get legal guidance. Both parties must get independent legal advice for a BFA to be legally valid.
Is it possible to end a BFA?
A binding financial agreement can be overturned by the parties themselves, either by entering into a new binding financial agreement or by terminating the arrangement.
A provision canceling the prior financial agreement would have to be included in a new binding financial agreement.
How Can Mediations Australia Help
At Mediations Australia, we have a team of family lawyers and mediators who can assist you negotiate and construct a prenup to suit your circumstance in Canberra, Perth, Adelaide, Melbourne, Sydney and all other locations in Australia. We also do international family law matters.