How water tight is a prenup?

By June 2, 2021Blog

Prenuptial agreements are becoming more and more commonplace here in Australia – particularly for couples who meet in their late 20’s or 30’s and have accumulated some personal wealth.

For a prenuptial agreement to be valid:

  • Both people must have fully disclosed all their assets and liabilities at the time it was entered into.
  • Both people must have their own lawyer advising them, independent of the other person, if the agreement is prepared by a lawyer.
  • The agreement must be in writing, dated, signed and witnessed.
  • Both parties must completely disclosure all assets and liabilities.
  • The agreement must not have been signed under duress, coercion, or undue influence.
  • The terms in the agreement have to be legally allowable.

But, just because a prenuptial agreement meets these requirements, it is still possible for it to be challenged down the track if the marriage or de facto relationship breaks down. Under Section 90K of the Australian Family Law Act, the courts will consider an application to have the agreement put aside on the following grounds:

  • One of the people obtained the others agreement through unconscionable conduct or fraud, or failed to disclose assets or liabilities.
  • The couple’s circumstances changed so significantly in the time since the agreement was made that it is impracticable for it, or parts of it, to be carried out.
  • There was a ‘material change in circumstances’ relating to the care of a child and upholding the agreement would result in hardship for the party caring for that child.
  • One person entered into the agreement for the purpose of defrauding or blocking a creditor, or with ‘reckless disregard for the interests of a creditor’.
  • One person entered into the agreement with the intention of defrauding another person who they are in a common law relationship.

 

Case in point

Recently the Federal Circuit Court of Australia set aside a pre-nuptial agreement. In this case, the couple had begun negotiating a prenuptial agreement while engaged. They had been expecting a baby, but sadly the wife gave birth to a still born son six months into the pregnancy. Naturally they were both devasted and in a state of shock.

As a result they decided to postpone they wedding, but as they still planned to marry, they both signed the prenuptial agreement.

After being married for four years, the couple made the decision to separate. The wife filed to have the agreement set aside due to the circumstances leading up to the signing of the agreement and her emotional state at the time, alleging that her husband had pressured her to sign.

In making its judgement, the court acknowledged that this was a difficult case, with a unique set of circumstances. While the husband’s negotiations prior to the stillbirth appeared to be made in good faith, the court could not ignore the fact that the husband should have been aware of the wife’s distress and grief at the time, given they were living together and in a loving and caring relationship.

The fact that the husband accepted the wife’s consent to the prenuptial agreement just seven weeks after the stillbirth of their son, was seen to be exploitative. As a result the prenuptial agreement was set aside.

 

Considering a prenuptial agreement or wondering if your agreement may be invalid?

The team at Lakey Family Law has significant experience in this area. If you would like to learn more about what is involved in preparing a prenuptial or financial agreement or explore the validity of one you’ve agreed to, we’re here to help.