Prenuptial agreements and finances 'should be discussed openly'

Date: May 11, 2011

While it might be fair to say that no people enter into a marriage expecting to use their prenuptial agreement, drawing up a legal document before your union could save you a considerable amount of time and money in the future.

Many legal experts agree that it is far better to draw up a document detailing how a couple's assets would be divided in the event of a split while the pair is amicable.

In fact, an agreement drawn up by the couple together under the guidance of a family lawyer will ensure a fair deal for both parties - and protect each individual's assets if the relationship breaks down.

The Age's Bina Brown pointed out that while many people find it difficult to discuss your assets or financial position with loved ones at the best of times, this experience is considerably harder in a family court.

But this open airing of personal financial matters could be a reality if a marriage, de facto or same-sex relationship falls apart and there is no clear way to determine which individual is entitled to what.

A number of financial advisers - including frequent Oprah guest Suze Orman - are advocates of prenuptial agreements, calling them a sign of openness and trust.

Prenuptial agreements address liabilities - including debt - as well as assets, so it is important for both members of the couple to be upfront about their situation.

Prenups are particularly beneficial for couples who wish to maintain their own assets - such as a business - during their relationship, as well as those who enter into the marriage with significant wealth or need to provide for children with a previous partner.

However, prenuptial agreements are not the only financial matter a couple needs to discuss before they tie the knot or move in together.

Ms Brown suggested that issues such as managing an everyday household budget, setting up a joint bank account and even both people's individual attitudes toward money and spending should be discussed frankly.

Suzanne Hadden, principal of BFG Financial, told the newspaper that couples who pledge to keep everything separate at the start of their relationship may find that "things may start to merge" over time.

She said: "You could find your assets being used as security for a partner's loan or you may authorise a second credit card, which means you are liable."

This could have devastating consequences for the person acting as guarantor on a loan if the relationship ends, Ms Hadden added.