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“Extreme” Binding Financial Agreements: the questionable morality of severe pre-nups

By July 18, 2016No Comments

By Gianna Huesch

Is it possible to draft a caring pre-nup?

An article by a divorce lawyer in America looks into some of the ethics of constructing a pre‑nup, and makes for an interesting read. Laurie Israel is the author of a new book called “The Generous Prenup: Creating a Caring Premarital Agreement that Supports Your Marriage”, which argues good pre-nups should aspire to support a marriage by providing security to the less-wealthy spouse, rather than lead the more-moneyed spouse down “the knee-jerk asset-protection route”.

In Australia, pre-nups are known as Binding Financial Agreements (BFAs) and can be entered into not only before marriage, but also during a relationship and even after a relationship ends. They are a written agreement between two individuals setting out details of how assets and liabilities will be divided at the end of their relationship. BFAs must fully comply with the requirements set out in the Family Law Act in order to be legally binding and enforceable. Each party must obtain independent legal advice before signing the document, and the parties must disclose their financial position and exchange documents evidencing the same, before agreeing to the terms of the agreement.

Laurie Israel writes, “My take on pre-nups is that they should meet the goals of both parties and also be as generous as possible within that framework. “  And yet she finds in practice, some lawyers deliberately create pre-nups that are “truly severe” and can leave the less-moneyed spouse “in a very fragile economic condition…even if the marriage were to end because of the natural death in old age of the more moneyed spouse”.  Such severe pre-nups often “actively prevent the sharing of assets and income with a spouse…The aim is to enable a wealthier spouse to minimise or even eliminate post-marriage rights of the less-moneyed spouse, while ensuring the agreement remains enforceable. She describes being shocked by this kind of mentality:  “Why would anyone want to destroy the financial security of a future spouse—someone that person loved enough to marry?”

The writer describes her own efforts, when acting for a less-moneyed spouse, to “try to make the terms of a pre-nup more generous to them and evidencing of more caring on the part of the more-moneyed partner”. On the other hand when acting for a more-moneyed spouse, she “will encourage that future spouse to exhibit caring and protection and fair treatment, even if the marriage should end in divorce.”

Her advice to those considering a prenup? “Think about what terms you would want in it to demonstrate caring toward your partner…no matter whether the marriage might someday end in divorce. That’s the standard you should aim to meet.”

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Are you contemplating entering into a Binding Finding Agreement with a partner? Please give Cristina Huesch or one of our solicitors at Alliance Family Law a call on (02) 6223 2400 so that we can guide you with creating not only a watertight, legally-binding BFA, but one that also truly reflects your values.


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