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Have you considered a collaborative pre-nup?

By July 1, 2021February 23rd, 2024No Comments

Collaborative family law can be a great way to achieve a “good divorce”. That is, a divorce which achieves as much of a win-win outcome for both parties as possible. It’s a divorce which allows a former couple to go their separate ways with respect and dignity, rather than lasting bitterness and acrimony. And it’s a way of reaching agreement on issues without having to go to court, which is always a plus. But did you know collaborative law can also be useful for happy couples who wish to negotiate and sign a pre-nup (Binding Financial Agreement) before getting married? Let’s take a look at the advantages of the collaborative pre-nup.

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Why get a pre-nup?

Pre-nups or BFAs were traditionally more often used by very high net worth couples, or couples where one party has a much higher net worth than the other. But over time, their utility has been recognised by the wider community, as a way to clarify how to divide assets and liabilities if a marriage ends and (hopefully) avoid going to court to determine a property settlement upon divorce.

There are many reasons why a BFA is useful, not just for high net worth individuals. BFAs can help protect family trusts and other dynastic wealth scenarios. They can identify which assets or debts to keep separate from communal marital property. They can explain how to deal with earnings a party might wish to keep separate. There can be clauses waiving or limiting potential spousal maintenance.

For older people getting married or remarrying, a BFA can assist with estate planning and probate issues. BFAs can also help avoid conflict with adult children or protect inheritances.

BFAs can also help protect businesses. For example, a BFA might ensure a business owner spouse doesn’t lose control or ownership of their business in the event of divorce. For the other spouse, the agreement can provide clarity on how business debts will be paid.

Sometimes people wish to enter a BFA to avoid any future court proceedings, thereby preserving confidentiality and privacy.

Whatever the motivations may be for entering a BFA, the content will always be tailored to the unique circumstances of a particular couple.

The traditional pre-nup process

Traditionally each lawyer consults with their client separately on a proposed agreement. The agreement is sent back and forth between the lawyers with requested changes, proposals and counter proposals. Lawyers might talk to each other and then to their respective clients. In drafting the agreement, each lawyer uses language that is intended to protect their own client only.

The traditional process can feel very adversarial to some people. Here they are, a happy couple embarking on marriage–then negotiating a pre-nup starts to feel like a legal fight. And for some spouses, the whole thing can feel quite one-sided, especially if they feel they are at a financial or power disadvantage. And the last thing a pre-nup should do is cause friction or place strain on a fledgling relationship.

The collaborative pre-nup process

The collaborative process, by contrast, shifts everyone out of the adversarial mindset. Each lawyer still wants to ensure their client’s interests are protected during negotiations and in the final draft of the BFA. But right from the start, both parties’ lawyers are working with the clients to find solutions that are satisfactory to both parties.

The process for collaborating on a BFA is similar to the process for a collaborative divorce. Each spouse still has their own lawyer to advise them and help them work out what they want the BFA to say. (By law, anyone wishing to sign a BFA must obtain their own independent legal advice—you cannot share a lawyer with your future spouse when you are drafting a BFA, whether collaboratively or not.)

Both parties and their lawyers meet together to identify the issues that the couple wants to address in their BFA and the potential solutions that will satisfy both parties. Each party can also talk with their own lawyer separately at any time, to ensure they understand the personal ramifications of terms or aspects of the agreement.

Other professionals can be brought in, too. This often includes a neutral financial professional who can help model various scenarios to find the best solution to benefit both parties. Sometimes a communication coach might be enlisted to help the couple with their communication behaviours and facilitate the process in a positive way. But even without such a coach, collaborative lawyers have been specially trained to assist clients to reach agreements in a respectful, cooperative way.

The parties take control of the process and are involved at every step, with their lawyer (and any other professionals) by their side.

Advantages of the collaborative pre-nup

  • Reduces stress

The collaborative process tends to reduce the stress than can come with negotiating a BFA. Because the parties are reaching agreement in a respectful, harmonious manner, it’s much more likely to be a calm process that has less chance of inadvertently damaging the relationship. The parties are able to communicate about the prenup in a safe, supportive environment. And because the process is driven by the couple, not their lawyers, the parties tend to be more satisfied with their co-created outcome.

  • Can enhance the relationship

What’s unique about the collaborative pre-nup process is that it’s a way to actually generate more harmony as a couple begins married life. The professionals involved help the couple to have the important financial conversations they should be having before they get married, to ensure they’re on the same page about their views on finances and money management. The couple is assisted to look towards the future and clearly communicate their expectations, values and how they want to shape their shared life. This can help the couple learn more about each other as well as reinforce feelings of trust and security. While a BFA itself only deals with financial issues, the collaborative pre-nup process can enable the couple to address the emotional aspects of these issues as well.

  • Potentially more enforceable

Any BFA can be challenged in the courts at a later stage. There are a number of reasons listed in the Family Law Act as to why a BFA can be set aside and ruled invalid. These include instances where a BFA is just too uncertain or ambiguous so that it can’t be properly understood by the parties. But the thoroughness of the collaborative pre-nup process is a potential safeguard against this aspect.

With the traditional process, a party might simply take a draft agreement to their lawyer and have the agreement assessed and the terms explained to them before signing. With collaboration, however, parties attend a series of sessions, which means that the process usually takes more time. This gives the parties much more opportunity to really understand the agreement. Sessions are also documented and/or recorded, so there is potentially a way to demonstrate that each party understood the ramifications of their decisions to sign the BFA.  It’s much more likely that you are receiving what a court would consider genuine legal advice, as it’s just so thorough.

While the collaborative process can take a bit more time, that’s not a bad thing in itself, as you want to avoid “ink on the wedding dress” scenarios in any case—another reason why a court might decide a BFA is invalid.

Note that only lawyers who are trained in collaborative law can assist with drafting a collaborative pre-nup. Here at Alliance Family Law, we specialise in collaborative family law. If you’d like to discuss using the collaborative method to draft your Binding Financial Agreement, please give Canberra family lawyer Cristina Huesch or one of our other experienced solicitors a call on (02) 6223 2400.

Please note our blogs are not legal advice. For information on how to obtain the correct legal advice, please contact Alliance Family Law.

Need help steering your ex towards trying collaborative family law? We’ve got some strategies that can help.

Or you might like to find out more about Binding Financial Agreements on the Family Court’s official page.

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