New research by ME Bank suggests that 74 per cent of Australians believe prenuptial agreements are fair and have merit; however, only 18 per cent of married couples have one — despite the risks, particularly for business owners.
Alan Wright, a family law-accredited specialist from Catherine Henry Lawyers, states that entering a prenuptial agreement (commonly known as a prenup) is about protecting assets.
“The prenuptial agreement (or financial agreement as they are legally known) sets out how the property is to be divided in the event that the couple separate in the future,” Mr Wright said.
Who is using prenups?
The new research, conducted by ME Bank, found that a third of couples aged 18–24 have a prenup, the highest of any age group, according to the research.
It also found that same-sex couples are also significantly more prepared over heterosexual couples, with nearly 41 per cent signing on the dotted line.
In comparison, the “what’s mine is yours” mentality still exists for middle-aged Australians, with 90 per cent aged between 40 and 54 not having a prenup.
Family law specialist Jennifer Hetherington (pictured), of Hetherington Family Law, believes any Australian with something to lose should enter into a prenup.
“Let’s face it, they are not romantic and they are not for people marrying young with their lives ahead of them,” she said.
“People who have children and money from a previous relationship might want to safeguard prior wealth for their children, but also provide for their new spouse. A prenup is like an insurance policy to avoid a will being contested or a family law claim,” Ms Hetherington said.
Isn’t it a bet against the marriage?
ME’s research shows that 47 per cent of couples think prenuptial agreements are inappropriate in a relationship based on love.
“You’re probably more likely to claim on this policy than your home insurance policy, and you don’t want your house to be damaged or destroyed, but that doesn’t stop you insuring your home,” Ms Hetherington said.
Mr Wright also commented: “A financial agreement is not for everyone. But, if you want to protect certain assets, e.g. assets that you bring into a relationship or may inherit, then the best way to proceed is with a financial agreement.”
What about a business?
For anyone who owns a business, marital breakdowns can add another layer of complexity. As such, a prenup or financial agreement can be a useful tool, lawyers suggest.
“Small business owners want certainty about the operation of their business. A financial agreement, providing for the division of property on separation, may provide that certainty,” Mr Wright said.
“If you don’t have a financial agreement, then the business forms part of the property pool to be divided. It may need to be valued by a forensic accountant.”
He added: “The matter may end up in court [and] the business may have to be sold or wound up if the owner cannot afford to retain it as part of the settlement.”
Ms Hetherington agreed that prenups should not be the exclusive domain of the rich and famous.
She said that, for business owners, as well as individuals “from the ‘big end’ of town”, they can be “an important and necessary risk management insurance against a relationship breakdown”.
“The point to remember is that prenups are absolutely legally enforceable. These agreements are not one-sided. They serve to protect the financial assets that each partner brings to the relationship,” Ms Hetherington said.
“They can also be used to protect the inheritance rights of children and other beneficiaries from a previous marriage or relationship.”
Queensland couple a prime example
Ms Hetherington said that she recently acted for a Queensland couple preparing to marry, who sought out a prenup to protect a family business owned for many years by brothers, some of whom had already experienced relationship breakdowns.
“What they wanted was for any of the brothers who were getting married to have a prenup so that the business didn’t come into it,” she said.
“They were a young couple, so it was very important that we factored in something that would make sure that the wife who was the financially less cashed-upped party would be okay on the relationship, particularly if they had children.
“It made it quite difficult because usually we don’t do prenuptial agreements if there are children, so what we did was include a formula that could be used to value the business, or the husband’s interest in the business, if the relationship broke down, so that he would not have to sell out his interest in the business and so the business itself would not be threatened by a relationship breakdown.”
Ms Hetherington concluded: “Call it a safety net, or insurance, but an agreement of this nature can also protect a business from being split up, or hav[ing] a former spouse exert some form of ongoing control over the business.”
[Related: 8 tips to ‘divorce-proof’ your business]
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.