People often talk about getting a “pre-nup” before entering into a serious relationship or getting married. In Australia, a “pre-nup” is called a Financial Agreement.
A Financial Agreement is similar to an insurance policy, and exists to provide peace of mind. It ensures that if something does go wrong in the relationship and there is an eventual separation, both parties are clear about their respective financial situations going forward.
A Financial Agreement is not about being unfair, but is designed to reduce the potential for any dispute.
A Financial Agreement might include:
- protection of property accumulated by either party before the relationship;
- protection of property received by either party, such as inheritances or gifts from family members; and
- outlining practical matters, including who will retain the former family home, and what happens to any investment property.
Entering into a Financial Agreement is a significant decision to make. The law imposes various requirements throughout the process to ensure fairness and transparency. Financial Agreements must legally meet certain technical requirements, and each party is required to obtain written, independent advice from separate lawyers as part of the process.
In general, Financial Agreements need to achieve both certainty and flexibility. Certainty is critical, so that it is clear how a Financial Agreement will be interpreted, if ever called upon. Flexibility is required in order to recognise that a family’s finances and circumstances are constantly in flux, and may not always be identical to their state at the time of executing the Financial Agreement. Unfortunately, sometimes these two demands can conflict.
A Financial Agreement therefore requires careful consideration, and should only be prepared by a family lawyer with the necessary skill and experience.