In today’s complex social world, the trust and love have different connotation than previously understood in the Ghazals and emotional Bollywood songs. While in love, one would say all ‘I have is yours’ turns to a bitter bone of contention at the time of separation.
The prenup is advised for a couple who is expecting to marry or enter into a de-facto relationship (including same sex couple). There are a number of advantages of entering into a prenup including certainty and finality of the net assets and resources of the matrimony in a way that the legal process cannot negate or alter the agreement. This implies that the potential dispute as to financial settlement is dealt with by the prenup itself. The prenup is private and confidential, saves time from litigating in court, helps in estate planning and results in tax benefits as the transactions carried out pursuant to the prenup do attract the same benefits as the court orders.
The Australian family law provides for the requirements of the prenups to become binding, vitiating a particular clause to make provision for the maintenance of the party, termination of the agreement by the parties and the scope of circumstances in which the court may set aside a prenup agreement and/or adjusting the property being a subject of the financial agreement that has been set aside.
The prenup includes a wide variety of matters including an understanding as to:
a. Each party had made no financial contributions as to the assets, resources, gifts or inheritances of the other;
b. Should the relationship end, each party would be solely entitled to retain their respective assets and superannuation;
c. As to how the joint assets would be held;
d. As to their respective liability for costs associated with, and any liability encumbering any of their assets and expenses;
e. Upon separation, neither party would have any claim against the separate assets of the other and any contribution to order maintenance or upkeep of the separate assets of the other party;
f. Provides for peace of mind and a clear direction for the concerned parties to make better plans for the future without worrying about unknown and uncontrolled consequences
g. The parties who receive or exchange the property can get substantial savings on capital gains tax and state transfer duty in appropriate cases.
The prenup effectively exclude the interference and determination of the financial settlement by the Family court.
However, the question whether a prenup is valid, enforceable or effective is to be determined according to the principles of law and equity which applies to determine the validity, enforceability and effect of contracts. One need to ensure that each party had received a separate legal advice as to the fairness and reasonableness of the terms. And understood the nature and effect of the agreement and the obligations and risks involved in signing that they had done so freely, voluntarily and without pressure from the other party.
The grounds on which a court may make an order setting aside a prenup are:
a. The agreement is void, voidable or unenforceable;
b. Party to the agreement engaged in conduct that was in all circumstances unconscionable;
c. Change in material circumstances resulting into hardship;
Special disadvantage rather than a mere difference in the bargaining power may result into setting aside the agreement including poverty, need of any kind, sickness, age, sex, infirmity, drunkenness, illiteracy, lack of assistance or explanation, ignorance, inexperience, impaired faculties, financial need or other matter that would affect a person’s ability to protect their own interest.
BY Gurpal Singh
(Gurpal Singh is the principal lawyer of Melbourne law firm, Saundh Singh & Smith Lawyers | W: www.sssl.com.au)