While it appears it’s a prerequisite in Hollywood to attach a prenuptial agreement with a marriage certificate, do everyday couples need a prenup (or binding financial agreement)?
Generally speaking, Australians are marrying later, meaning they have worked for longer and accumulated assets in their own name including property, cars, superannuation and other investments. The future ownership of these assets – particularly when one partner brings more assets than the other into the relationship – can be a challenging situation for couples to deal with.
Marriages should be built on mutual trust, but does this mean we should instantly grant joint ownership of hard-earned investments to spouses, who may have been less financially responsible in their single years and more interested in having a good time?
That’s why many financially-mismatched couples have followed the US trend of prenups, especially if children and assets from a previous failed relationship are also in the mix.
Every couple is different and the answer depends on what each partner is comfortable with.
Many lawyers specialising in Family Law would note that with the uncertainty surrounding financial agreements in Australia (we only need to refer to Grant Hackett and estranged wife Candice Alley), the normal process of the Family Law Act can be the fairest outcome.
The court will take into account all property initially brought by each party to the relationship and then assess the contribution of each person during the relationship, including property acquired during the marriage, gifts and inheritances, assets owned by each party prior to the marriage and any assets and goodwill built up in a business.
Lawyers recommend that accurate record keeping is the best starting point for protecting the assets you take with you into a relationship. Undertaking asset valuations when the relationship starts and then valuing any assets from inheritances and windfalls you may receive is important.
Ongoing monetary housekeeping can also maintain some sort of financial independence in a relationship. There may be reasons for each of the partners to continue with individual bank accounts into which their wages are deposited and agreed expenses between both partners are paid.
It’s wise to complete a household budget as soon as you start living together, particularly if separate bank accounts are to be maintained and each spouse is responsible for their own expenses. This can also be a good indicator of whether you are both financially compatible. Realising you’ve married a compulsive shopper if you have always watched the purse strings can place early pressure on a relationship, and indeed such incompatibility can ruin a relationship.
Property ownership between spouses is also an interesting decision. There are two choices, tenancy in common or joint tenancy.
Tenancy in common allocates each spouse direct ownership of a nominated portion of the property. As such, it means each spouse is responsible for their own loan and share of the property only.
A joint tenancy agreement means that each spouse is jointly responsible for the entire property, as well as the full amount of any loan on the property.
Finally it is critical to remember that a marriage will automatically negate any previous wills, meaning it is essential that wills are reviewed after marriage and regularly updated to take into account new children in the relationship and changed personal circumstances.