‘How do you feel about signing a prenup?’ There’s no way around it – it’s an unromantic conversation to have with your partner.
There is no doubt, however, that a financial agreement is the highest the law has to offer to protect your wealth in the event of separation from your spouse.
A financial agreement is essentially a contract that is designed to contain all the terms of your property settlement and spousal maintenance agreement if you and your partner separate. It prevents either of you from invoking the jurisdiction of the Federal Circuit and Family Court of Australia for a greater or different financial settlement in the future.
A financial agreement may be entered into before, during or after a marriage or de facto relationship.
There are strict requirements in the Family law Act 1975 that must be met in order to ensure the agreement is binding.
While financial agreements are the best protection the law offers to quarantine your wealth from a separated spouse, there are various grounds upon which they may be challenged or set aside; the protection they offer is not absolute.
Where your partner does not agree to signing a financial agreement, the other way you may seek to protect your wealth is to keep your assets and income separate throughout your relationship.
Just because a party is married or has been in a de facto relationship that has broken down, does not necessarily mean they are entitled to an adjustment of the other party’s property. That is, the passage of time in a relationship does not create an entitlement to a property settlement; there must be more than simply being together.
Where parties have kept their assets entirely separate during their relationship and have made no financial or non-financial contributions to each other’s assets, it may be that they have no claim to a property settlement.
In keeping your finances separate, you should consider:
- maintaining sole bank accounts
- purchasing real property in your own name and being solely responsible for expenditure related to the property, such as maintenance and renovations
- purchasing vehicles and other assets in your own name
- being responsible for your own debts
- not giving your partner your secondary credit card
- spending your discretionary income as you please without consultation with your partner
- equally paying household bills and groceries where you have equally benefited from those expenses
- executing wills leaving your estate to your family and children but not to your spouse
- where you have a family trust, not making any distributions to your partner.