5 powerful reasons to get a de facto prenuptial agreement in Australia
Prenuptial Agreements, or ‘Binding Financial Agreements’ as they are called in Australia, are a very sensitive and often misunderstood topic. Some people perceive these types of Financial Agreements as an indication that a relationship is not going well however, this is not usually the case.
People don’t purchase life insurance because they expect to pass away any time soon, they do so to ensure that their finances are in order if the worst were to happen. Binding Financial Agreements are no different.
While these agreements are only really portrayed in the media in relation to celebrities or the super-wealthy who are about to get married, the truth is, in Australia, ‘prenups’ (as they are colloquially referred to), are a very helpful tool for financial planning that can be entered into by everyday people before, during, or even after a relationship, whether or not a couple intends to get married.
The truth is marriage isn’t for everyone. The good news is the law in Australia does not discriminate between married and de facto couples. The bad news is, this can sometimes lead to people not realizing just how serious the financial implications are of dating someone long-term, especially if it gets serious.
While they are made under different sections of the Family Law Act, Binding Financial Agreements made in relation to de facto relationships offer every bit of flexibility and protection that one made in relation to marriage does.
To clear up some of the taboos that surround the topic, here are five big reasons why you should consider getting a de facto prenuptial agreement, based on Australian law:
1. Solidify your relationship with a de facto prenuptial agreement
These de facto ‘prenups’ are usually made by couples in the hope that they will never need to rely upon them. But in obtaining one, couples create a solid foundation upon which they can grow and nurture their relationship.
For those about to enter into a de facto relationship, by easing the pressures a party may feel to protect their finances, both parties are free to throw caution to the wind and fully immerse themselves in a relationship.
For those already in a de facto relationship, these Agreements can offer peace of mind about what would happen if the relationship were to fall apart in the future, which can be comforting no matter how solid the relationship is.
2. Protect your children
Entering into a new de facto relationship can be a difficult road to navigate for those that have children from a previous relationship. For many parents, their first instinct is to protect their children and to ensure that they are provided for. Anyone who has gone through the Court system after a separation can attest to how emotionally and financially taxing the process can be.
By entering into a de facto ‘prenup’, in the unfortunate event that the relationship breaks down, parents can ensure that:
- they (and their children) are sheltered from having to go through the Court process again; and
- their assets are not further dissipated.
3. Protect your pets
While many of us consider our furry friends to be a part of the family, under the Family Law Act, pets are considered to be property and the Court will not make Orders for joint custody.
Buying a four-legged companion is often a big step in a de facto relationship. De facto prenups can offer peace of mind about what happens to them in the event of a break-up. They can also be quite flexible if worded correctly.
4. Protect your property with a de facto prenuptial agreement
While you may not have much when entering into a de facto prenup, these Agreements can also deal with future property. So they’re a powerful tool in helping to protect any future inheritances you may expect to receive.
This can be particularly important to some as there is oftentimes a strong, sentimental attachment to any items inherited from a loved one.
5. Spousal maintenance
Competing with prenups for the area of law most often misunderstood, spouse party maintenance, or “alimony” as it is referred to in America, can be claimed by parties following the breakdown of a de facto relationship in Australia. The test applied by the Court is quite straightforward in that it requires:
- one party to have a need for such support; and
- the other party to have the ability to pay it.
By entering into a prenup, de facto couples can effectively contract out of their right to seek spousal maintenance from each other, so long as neither party was reliant on an income-tested pension at the time the agreement came into effect.
So there you have it. These are five solid reasons that de facto prenuptial agreements are worthwhile, and not just for married couples.
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