Creating a Will before marriage or beginning a defacto relationship is simple. But if your relationship status changes, your Will is no longer valid. If you decide to enter marriage or a defacto relationship, you need to update your Will to reflect this new commitment and provide for your spouse. If you decide that you don’t want your new spouse to have an automatic claim on your estate, you can sign a pre-nuptial agreement (binding financial agreement).
Who should sign a Pre-Nup?
Common situations where pre-nuptials are signed are where:
- You both have significant assets
- You have significantly more assets than your partner
- You own a business
- You want to ensure that children from a previous marriage have access to family wealth
- You have special circumstances in the family (e.g. caring for a disabled child)
- You want to keep pre-marital assets separate
- You want to set out a financial plan for the children of blended families
- You want certainty about the distribution of property upon your death
- You want to avoid the other party’s debt
- You are part of a wealthy family and want to protect your potential inheritance.
What makes the financial agreement valid?
For a binding financial agreement to be valid, it must be in writing, signed by both parties and made in contemplation of the parties entering into a marriage or defacto relationship. Each party should receive independent advice from a legal practitioner about the effect of the agreement on the rights of that party and the advantages and disadvantages.
When can a binding agreement be set aside?
A spouse is able to challenge a binding financial agreement under section 90K of the Family Law Act. The Court can set aside an agreement in the following circumstances:
- Intent to defraud or defeat a creditor of the party
- Reckless disregard to the interests of a creditor of that party
- The requirements for a binding agreement were not fulfilled
- Material change in circumstances that relate to the care, welfare and development of a child of the marriage.
- Unconscionable conduct while developing the financial agreement
- If a party to the agreement will suffer hardship if the agreement is not set aside.
If you undergo any significant change in circumstances, make sure to review all financial matters. This includes your Will, Power of Attorney and Appointment of Guardian.