Prenups: A Brief Guide
A prenuptial agreement is a legally binding document which outlines how the parties’ assets and liabilities (called “Property”) are to be divided after the relationship ends. This may include either some of the Property, all of the Property, current Property, and future Property.
Some examples of what may be included in a prenup include: house or apartment; business; pets; funds in bank accounts; inheritance; financial portfolio; household contents; changing percentage of total Property division in the event of having children.
Benefits
Some benefits of a prenup include:
To protect Property for particular situations, such as: a business; a large inheritance; a significant investment portfolio; significant wealth before entering the relationship; and older parties because their circumstances are more predictable and less likely to change.
While the relationship is amicable, a prenup is a good opportunity to outline how Property should be divided if the relationship does not work.
A prenup may reduce the likelihood of a future legal battle because expectations of what will happen if the relationship ends are set ahead of time.
A prenup may reduce the cost of resolving an ended relationship if it prevents a major Court battle.
Negatives
Some negatives of a prenups include:
Prenups can lock couples into something which seemed like a good idea at the time but later ended for the worse. For example, the parties signed an agreement whereby one of the parties was excluded from owning a share of the business. At the time of signing, the party may not have expected that they would have helped out in the business but years down the track the contributions of that party resulted in large profits for the business. There are endless unexpected ways that life could play out for better or for worse.
Prenups can create the impression for non-lawyers that post-relationship laws are unfair or less fair than a prenup. There has been significant consideration made by couples, judges, barristers, and lawyers found in the case law over the years. The outcomes of the prenup might be worse than if the relationship were resolved in accordance with the post-relationship laws.
Prenups are not 100% rock solid as there’s an array of grounds to overturn them. Some of these grounds include fraud, duress, defrauding a creditor or spouse, not creating the agreement correctly, change in circumstances, not providing for future children, or unconscionable conduct.
There’s an implicit suggestion that if the relationship were to end, the other party is the kind of person who would behave unfairly. There’s a degree of distrust either about the other person in the prenup or a distrust about humanity in general.
Conclusion
In The Law Project’s view, there is no clear line or rule of thumb for whether a prenup should be made. Instead, whether a prenup should be made will differ for every couple. In some cases, a prenup is a good idea but in other cases, a prenup may not.