In Western Australia, a "prenup" is referred to as a Binding Financial Agreement (BFA). Many couples discuss the option of entering into a prenuptial agreement prior to getting married. One question we often get is whether the mutual benefits of entering into a prenup outweighs the risks associated if you decide to separate.
Pros of a Prenuptial Agreement
The pros of entering into a correctly drafted BFA include: 1. Certainty regarding the distribution of assets and liabilities if your relationship breaks down; 2. Assets owned prior to the relationship can be quarantined; 3. Minimal legal costs at the time of separation; and 4. Application of stamp duty and other tax concessions upon transfer of assets between the parties at the time of implementing the agreement.
Cons of a Prenuptial Agreement
The cons include: 1. The costs of preparing the agreement; 2. The fact that both parties must obtain independent legal advice; and 3. The complexity of preparing the agreement in consideration of children.
Drafting a Prenuptial Agreement
In order for a BFA to be binding it is imperative that you obtain independent legal advice and ensure the document has been correctly drafted under the Family Law Act. In certain circumstances, particularly when couples are older, already have children and have substantial assets or income the benefits of a BFA can far outweigh the risks. However, failure to obtain the right legal advice can result in an agreement that is not worth the paper it is written on.
If you would like more information on prenuptial agreements or would like to have one drafted, please call us for a free, 15 minute chat.