Prenups in 2011 – Does your relationship need a binding financial agreement?
Binding financial agreements, commonly known as prenups or prenuptial agreements, are legal documents that outline exactly how assets and liabilities will be divided between your partner and yourself should the relationship break down. While the subject is not one of romance, it is important for you and your partner to discuss what will happen to your finances and assets should you split. This is important for not only married and engaged couples, but also for de facto and same-sex relationships.
When creating a binding financial agreement it is important for you and your partner to work through it together, than to write separate agreements and present them to one another. By doing this together you can agree on things as you go, this puts much less strain on the relationship than seeing your partner’s one sided proposal. The topic can be a difficult thing to discuss, since splitting up and the problems that arise are not things couples wish to think about. However it is important to discuss what will happen to your money, the division of property, how any children will be provided for, and other issues in a supportive environment.
As a couple you should also discuss your basic everyday financial matters such as bills, budgets and joint expenses. Couples with separate accounts might consider a joint account purely for these everyday things. Although things may change from ‘mine’ to ‘ours’ over time it is important to remember who the assets and liabilities belong too in the unfortunate event of a split. Other potential issues which can arise when the ownership lines are blurred include your assets being used as security for your partner’s loan, authorising a second credit card for him or her, which you are liable for, or acting as a guarantor for your partner’s loan which you will have to repay if your partner fails to do so. With most couples these things aren’t an issue, but it just goes to show that you need to be aware of your partner’s attitudes to money and how he or she handles their funds before you take that step together.
Other things that need to be discussed while making a binding financial agreement include:
• What will happen if one person loses their income?
• Where will the assets go if a person passes away, and who will receive the super fund benefits?
• If one person receives an inheritance, does it become shared money or separate money?
• What other assets are considered shared, and what assets are considered separate?
Many people decide to create a binding financial agreement in order to keep their business private, should the relationship breakdown for any reason. Since the agreement is a binding legal document recognised in the Family Court, couples with a binding financial agreement in place often can avoid lengthy, costly and obtrusive court cases. The majority of people who employ the use of these agreements are generally those with substantial assets, people entering into second marriages, couples with children from previous relationships or perhaps one partner who has considerably more assets than the other.
Once a couple has been living together for two years, or less if one person has made a substantial contribution to the relationship or if you have a child, the division of assets in the Family Court can get a little messy. This is why it is an important and healthy thing to discuss because it can prevent so many issues in the future. A binding financial agreement is there purely for security, it shouldn’t be thought of badly or be the reason for a relationship break down! Instead, a good agreement for a couple is one that is signed and put away, never to be seen or thought of again.
It is a legal requirement that each person in the relationship receives independent advice before signing a binding financial agreement. Here at The Quinn Group our experienced team of lawyers are able to assist you in creating a comprehensive agreement, as well as any other family law matters. For more information submit an online enquiry or call us on 1300 QUINNS (784 667) or on +61 2 9223 9166 to book an appointment.