Prenuptial agreements, commonly referred to as prenups (or pre-nups), and legally known as Binding Financial Agreements, are intended to protect the property rights of an individual if a relationship breaks down.

While such arrangements are often sensationalised in celebrity gossip columns, in reality they are serious agreements, and ones that need to be properly understood by both parties involved. In recent years there have been a number of prenups that have been thrown out or set aside by the courts, leading to some questions on whether these arrangements are truly valid in Australia.

 

What is a prenup?

First things first, let’s get our definitions straight. In plain English, a prenup is a written contract agreed to by you and your partner before, during or after a marriage or de facto relationship. It serves to explain exactly what will happen to your finances and assets during your relationship and in the event of a separation.

 

Can prenups be enforced in law in Australia?

Now we know what prenups are, we’ll put to bed the myth that prenups aren’t legally enforceable In Australia. Prenups are enshrined in law under Section 90B of the Family Law Act 1975, meaning they are legally binding and enforceable.

However, the courts can set a prenup aside if they believe that the agreement doesn’t comply with the requirements of the law. This essentially invalidates the prenup, and the property protections it was intended to provide.

 

When can the Australian courts set aside a prenup?

There are a number of scenarios in which a court can rule to set aside a prenup, these include:

 

1. When independent legal advice wasn’t sought or given prior to signing 

Part of the The Act governing prenups states that all parties must have sought and receive independent legal advice regarding the implications of signing the agreement. If they don’t, this can be grounds for the agreement to be set aside. The agreement can be set aside if both parties did not receive independent legal advice as to the advantages and disadvantages of entering into the agreement, and the effect of the agreement on their legal rights.

2. Failure to disclose assets

While, technically, you can explicitly agree not to disclose all of your assets as part of a prenup, you have to make the other party aware that this is the case (and it’s unlikely their independent legal advisor will recommend they sign in this instance).

If, however, you choose not to disclose your assets, and keep this a secret, you’ll be providing the other party with excellent grounds for having a prenup set aside following a separation.

 

3. Unconscionable conduct and duress

If the court believes your partner felt forced to sign the prenup agreement, this can also be grounds for the agreement to be set aside.  An infamous example in Australian legal history was a husband who threatened to cancel a fully organised and paid-for wedding three days before it was due to take place, if his soon-to-be wife didn’t agree to sign. In this instance, the judge ruled in favour of the wife due to the duress under which she was placed, and the agreement was set aside.

From this, we hope you understand that prenups are fully legally valid and enforceable in Australia, however they require due diligence and sound prenuptial legal advice if they are to offer you the asset protection you seek. To get advice specific to your unique circumstances, get in touch with the experienced team at Testart Family Lawyers.