A prenup or prenuptial agreement is a common term given to an agreement made before marriage. In Australia, a prenup is known more correctly as a Financial Agreement. Financial Agreements are available to married, as well as de facto, couples, and at all stages of a relationship.
Some of the benefits of the advantages of entering a marriage prenup are;
Knowing in advance how financial matters will be dealt with in the event of a relationship break down provides peace of mind.
- Protection of assets
For some couples, it is important to know that their assets will be passed onto their children or other loved ones. This is particularly important for mature couples of a second relationship who have already each accumulated wealth and property.
- Protection of inheritances
It is common for some parties to enter into a prenup solely to protect inheritances. This ensures that the inheritance will stay within the family (and future generations) rather than being passed onto a stranger.
- Quarantine of assets accumulated prior to the relationship
In Australia, unlike some other countries, the property held by the parties prior to the relationship is added to the asset pool by the courts when dividing assets. A prenup allows a party to quarantine assets accumulated before the relationship commenced.
Financial agreements allow couples the opportunity to take financial matters into their own hands, rather than placing that power in the hands of the court. By correctly implementing a prenup, you are effectively ousting the jurisdiction of the court to intervene and decide how your property will be divided.
- It’s easier to reach agreement when you are planning to stay together
Discussing an exit strategy now, allows you to deal with division of property in a non-combative, amicable way, rather than dealing with these issues in the midst of substantial change, grief and hurt feelings that are associated with relationship breakdowns.
- Saves time, stress and legal costs associated with separation
A prenup helps facilitate a smoother journey through separation and divorce which will save you substantial time and money. This allows both parties to move on sooner, rather than be engaged in ongoing negotiations, legal wrangling or litigation.
- Provides a ‘business plan’ for the relationship
Having an asset plan in place can assist the parties to understand and grow their personal and joint assets in confidence.
- Facilitates communication
A prenup prompts open and honest communication. Working through and discussing the issues makes each partner aware of each other’s wishes and intentions. This allows both parties to enter into the marriage with a greater understanding of themselves and the other. This will…
- Eliminate misunderstandings
A requisite to making a marriage prenup is that each partner make full and frank disclosure of their assets and liabilities. This honest communication helps each partner openly discuss financial matters and eliminates confusion or misunderstandings in the future.
- Lastly, prenups can protect you from your spouse’s debt!
As well as specifying how assets are to be apportioned and divided, a pre-nup can also specify who will be responsible for debt incurred either before, during or after a relationship. If this is not addressed, debt can be added to the pool of assets and can impact property settlement decisions made by the Family Court.
So that’s 11 excellent reasons to use a prenup before marriage.
Please remember – you can use a Binding Financial Agreements at any stage of a relationship (before, during or after) whether you are married or just living together (defacto). For more information please visit the Family and relationship Docs section of our website or our financial agreement specialty site www.peacefulpath.com.au
For more info go to Pre-nups