Take your legal advice from Hollywood? Then you might believe that the easiest way to separate your finances during a divorce is with a prenup. But the truth can be a little more complicated. Especially in Australia, where there is still some confusion about whether prenups are actually legally binding.
Here’s what New South Lawyers Family Law team had to say about the matter…
What is a prenup
While most people enter marriages with the hope that they will last till “death do us part”, the reality is that they often end much sooner, with the current divorce rate in Australia currently sitting at approximately 33%.
With that in mind, a prenuptial agreement (aka a premarital agreement or prenup) makes financial sense. And while this written legal contract stating how a couple’s joint finances and belongings will be distributed should they ever separate is often associated with A-list actors, the truth is everyday individuals can benefit from drawing up something similar as an insurance policy … just in case things don’t go to plan.
So, is a prenup legally binding in Australia?
In Australia, prenups are known as Binding Financial Agreements (BFAs). Established according to section 90B of the Family Law Act, they are drafted at the beginning of a relationship (marriage as well as defacto) to set out how assets will be divided if a couple breaks up in the future.
And while they may go by a different name to their celebrity-endorsed counterparts, yes prenups are legally binding in Australia.
How do the courts determine how your assets are split during a divorce?
In the absence of Binding Financial Agreements, non-legal arrangements and consent orders are often used to determine the split of assets following a separation. Failing this, litigation is often the last resort initiated to allow the family court to determine how a couple’s assets and liabilities will be split.A lengthy and costly procedure (that can often have emotional impacts on the parties involved) litigation is often assumed to result in a 50/50 split of assets. However, there are a number of contributing factors, which may also alter the balance to ensure the fairest outcome. In order to achieve a more just, equitable, and fair financial agreement, the courts will usually consider the following four factors.
- Valuation of assets
- Assessing the contributions of both parties
- Determining future needs
- Evaluating the impact
Need support drafting a prenup (aka BFA!), or indeed any matters pertaining to an impending divorce? Our experienced family lawyers are here to help. Reach out today.
New South Lawyers’ communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication.