In a perfect world, we would all meet the person of our dreams, tie the knot, and live happily ever after. But the world of marriage is far from perfect and, as we know, life throws curveballs. Should you get a Prenup?
Marriage continues to gain a lot of attention in the media for all kinds of different reasons, but is there enough emphasis being placed on what happens if a marriage fails?
According to a recent article in the Huffington post, 1 in 3 marriages in Australia end in Divorce, however very few sign a prenuptial agreement to protect their assets.
So what is a Prenuptial Agreement?
A prenuptial agreement or prenup, is a contractual agreement between two parties who are entering into, or have entered marriage. The document is designed to protect their assets if their marriage fails, and they become the 1 in 3 statistic.
Prenups can be made before, during, or after a relationship, this includes marriage or de facto. Common assets that are protected by a prenuptial agreement are:
- real estate
- family business
- a trust
- inheritance entitlements
- pension entitlement
When you and your partner come to an agreement on how your property is going to be split, it must be legally binding. While we won’t go too much into the legal obligations surrounding a prenuptial agreement, it is essential to ensure that your assets and liabilities are protected by the agreement, it can’t be contested, and it doesn’t become a Family Courts matter.
Things to consider when drafting your Prenup:
To achieve the best outcome for both parties, it is essential to go over how your assets are to be divided. Here are a few things to consider when drafting the document with your lawyer:
- Your working commitments as individuals
- How you propose to meet your financial commitments and cost of living
- Whether you plan to have, or already have children;
- The implications if one of you can’t work due to personal illness or if a child requires special care;
- Do you intend to have provisions surrounding your expectations for inheritance?
- What your goals are for retirement?
- How your bank accounts are set up; joint or separate?
It is important to go into as much detail when drafting your prenuptial agreement. The more information that you can provide in the document, the more chance it has of holding up throughout the divorce process.
But how do I bring it up with my partner? Won’t they be offended?
Rarely is a conversation with your partner particularly comfortable one when it comes to talking about money, and a prenup conversation is by far the least romantic of all the marriage related conversations that you will have. Indeed it can be difficult to bring up, however once the initial awkward tension disappears, it can be a highly beneficial conversation to have. Touching on the slightly touchy subject now might save you thousands of headaches and a potential legal bloodbath down the track.
One of the best ways to bring up the topic is to have your financial planner bring it up in your regular meetings. This eliminates the potential apprehension that your partner may feel in comparison to you bringing it up yourself.
Be upfront with your spouse and be clear on your intentions, and make it clear that it isn’t a judgement on them, but simply a rational conversation about the future. Obviously the sooner that you can talk about it, the better. Nothing kills the pre-wedding vibe like being held to ransom by a last minute prenup.
What to include in a Prenup – Without going overboard
Traditionally a prenup is implemented with the purpose of protecting assets and financial
liabilities, wealth and debt. However in the modern-day prenup there are different lifestyle factors that can be included. These can range from fairly common clauses (such as who gets custody of pets, goods etc.) to the more extreme (e.g. lump payouts for not adhering to predetermined relationship standards such as cheating etc.)
Also gaining popularity among couples is a social media clause which protect one another from being defamed publicly via social media or having their embarrassing photos posted online. This sounds extreme but it in the sometimes dark world of divorce, can certainly happen. Violation of this clause can lead to serious fines, and it has been reported that a breach could cost up to $50,000.
When drafting your prenup refrain from incorporating too many trivial lifestyle clauses, as it can lead to a judge throwing out the agreement in a court, if the clauses are not deemed legally enforceable.
So no matter what stage of your relationship you are in, take the time to look at your current financial arrangements, and whether they are robust enough to protect both your spouse and yourself should things take a turn for the worse. Make the decision to sit down with a professional and decide what provisions to put in place, and continually assess whether they are still relevant to your current circumstances. Especially if it has been a few years since they were first conceived.
To find out more about how Nitschke Nancarrow can help with allocation of finances in your relationship and beyond, contact us today for a free discussion.
Read on: Wills and Estates – What to do when your loved one dies