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You may have heard the term “prenup” before. Usually in the context of someone definitely needing one as a financial safety net in a relationship. However, what does it actually entail? And is it beneficial for both parties? Here are the 5 things you need to know.
A prenuptial agreement (prenup), otherwise known as a Binding Financial Agreement in Australia, is an agreement between couples who are considering getting married or entering into a de facto relationship. Prenups cover financial matters such as superannuation, quarantine initial contributions, spousal maintenance and interests in corporate trusts and entities.
What are prenups used for?
Children. Prenups may be used to make sure your children get their fair share of assets when you pass. This is especially relevant if you have children from prior marriages. If there is no prenup in place, the surviving partner may have the right to the vast majority of your assets, leaving much less for your children.
Financial rights. It doesn’t matter what your financial situation is. A prenup is not only for the rich. Many like to clarify their responsibilities and financial rights during a marriage.
Arguments during divorce.
By listing out exactly how they would like their property and other assets to be divided, the couple could prevent major disputes in case of a divorce. Another moment that can be specified in a prenup is whether or not either partner will receive alimony.
Protection from debts. Prenups can also be used to protect you from other party’s debts.
What are the advantages of prenups?
- Prenups give the parties greater certainty and control
- Can be confidential
- Prenups clarifiy initial and ongoing financial contributions
- Where parties have children from former relationships, they can protect assets for those children
- Encourage parties to identify financial priorities
- Prenups promote better long-term communication
What are the disadvantages of prenups?
- The agreement may treat one party unfairly
- Emotionally, they might suggest a lack of trust
- They are costly because the parties must have their own Solicitor
What can you do to ensure you receive the best outcome from prenup?
So you decide you want a prenup. Firstly, you should keep your prenup updated. If any marital change occurs, the prenup might need to be updated. You also should be very precise. Whatever arrangement you want to agree on, make sure that it is clearly written and precisely outlines the terms of the agreement. Detail is key.
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