Prenuptial Agreements – Are they worth the paper they are written on

Prenuptial Agreements – Are they worth the paper they are written on? In Australia, pre-nuptial agreements are relatively new. That is to say, such agreements were not recognised as binding until amendments were incorporated into the Family Law Act in about 2000.
In Australia, pre-nuptial agreements (known as Binding Financial Agreements) can be entered into by parties who are intending to marry or intending to enter into a de-facto relationship. Such agreements can also be entered into after the marriage has taken place or the de-facto relationship has commenced.
These agreements will not be binding under Australian Law unless the formal requirements under the Family Law Act are met. The Agreement will only be binding if the following requirements are satisfied:
1. The agreement is signed by all parties;
2. Before signing the agreement, each party was provided with independent legal advice about the effect of the agreement on the rights of that party and about the advantages and disadvantages to the party making the agreement;
3. Either before or after signing the agreement, each party was provided with a signed statement by the legal practitioner stating that the advice referred to above was provided to that party;
4. A copy of the statement referred to in 3 above was provided to the other party;
5. The agreement has not been terminated and has not been set aside by a court.
In some special circumstances, the court may declare an agreement binding if all of the above requirements are not satisfied. The Family Court, however, does have discretion to set aside the provisions of a Binding Financial Agreement properly signed in certain circumstances. They include the following:
1. Where the agreement was obtained by fraud (including non-disclosure of a material matter). For example, if a party failed to properly disclose in the agreement their assets and liabilities;
2. The Agreement is void, voidable or unenforceable. That is, the binding requirements were not fulfilled under the agreement as set out above;
3. A party has entered into the Agreement for the purposes of attempting to defraud or defeat a creditor or creditors;
4. In the circumstances that have arisen since the agreement was made, it is impracticable for part of the agreement to be carried out;
5. Since the making of the agreement a material change in circumstances has occurred relating to the care, welfare and development of a child which would mean that a party would suffer hardship;
6. A party to the agreement has engaged in unconscionable conduct in the process of entering into the agreement. For example, one party insists that the marriage will not proceed unless the agreement is entered into.
Given that the court has the powers to vary or set aside an agreement, is it worth going to the trouble of making the agreement at all? Advising clients about these types of agreements can be a difficult task.
It is impossible to predict the future as there are so many variables that may occur to either of the parties. For example, one of the parties may lose their job or suffer an accident and consequently have insufficient funds to support themselves. In such circumstances, it may be more advantageous to that party to leave it to the provisions that are provided under the Family Law Act relating to the division of property following a separation from a spouse.
On the other hand, an agreement of this nature can provide the parties with some certainty which avoids a bitter legal battle at a time when emotions are high. Often, it is the family members (such as children from a first marriage) who are keen to protect their inheritance who are urging their mother or father to take such steps prior to pursuing the new marriage or relationship. In order to maintain the harmony within the family unit, it is sometimes more advantageous to enter into a Binding Financial Agreement.
Much depends on the individual circumstances of each party and of their preferences. It is important that the parties obtain advice from a lawyer who has sufficient experience to advise about Binding Financial Agreements. The failure of a party to obtain the correct advice can give rise to a court setting aside the agreement.
Furthermore, there are other matters that need consideration before marriage. For example, a Will that is made before marriage is usually revoked when the marriage occurs, unless the Will is made in contemplation of marriage. It is also important to look at the way in which an asset is legally owned so as to meet all your needs after death.
Obtaining some decent legal advice can avoid the heartache they may occur many years down the track.