Should you sign a prenuptial agreement before you walk down the aisle?
Prenuptial agreements – or ‘prenups’ as they are more commonly called – are often thought of as ‘un-romantic’ or just plain unnecessary unless you’re incredibly wealthy. But this couldn’t be farther from the truth.
Signing a prenup agreement (known legally as a binding financial agreement in Australia) is a great way to set out your financial wishes if your marriage ends in divorce or if one party passes away. Today we delve into the specifics of these agreements, outline the pros and cons and consider what type of relationships it works best for.
So what exactly is a prenup?
A prenuptial agreement is a legally binding contract created and signed by two people before they are married. This agreement usually provides the framework for handling financial issues if the two parties decide to divorce. Areas such as property, inheritance, income and businesses owned by either party before the marriage or acquired during the marriage can be covered in this contract. So, should you sign a prenup agreement?
What are the benefits of signing a prenup agreement?
A prenup is an excellent idea for several reasons. If divorce occurs, it can:
- Protect one party’s business from being divided or controlled by a former spouse.
- Limit the amount of spousal support payable to the other party.
- Protect the financial interests of people with substantial wealth.
- Protect the inheritance rights of any children or grandchildren that exist from previous marriages or relationships. Read more about grandparents’ rights here.
- Help your marriage start with clear intentions and expectations, allowing you to go forward without worry.
And what are the drawbacks?
While there are many pros to getting a prenuptial agreement, there are also a few cons, such as:
- If stated, it may void your right to any spousal inheritance that you would be entitled to under the law.
- If you contribute to the success of your spouse’s business, but are not entitled to any part of said business as per the agreement, you will not be able to claim anything upon divorce.
- Some people feel that beginning a marriage with this contract can indicate a lack of trust.
- As it is an agreement entered into outside of Court, it is not possible to guarantee that the agreement will be binding unless and until one of the parties challenges it in Court if the relationship breaks down. However, it is one of the best forms of protection, provided that a specialist family lawyer drafts it.
So, what type of relationship does it work best for?
In theory, a prenuptial agreement can work for every type of marriage where:
- financial assets are already established before your union, or
- if there is an expectation of a future large inheritance from family members.
If separation or divorce does occur later in life, it can potentially assist in keeping it amicable.
If you don’t have any property, businesses, inheritance or anything else to protect, there might not be a need to draw up such a contract. But if you do, it’s best to sit down with your partner and determine whether you should sign a prenup agreement and if it’s right for your circumstances. (Remember, your beloved pets also count as property!)
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