Financial agreement: A wedding gift to consider

Date: Oct 19, 2011

A prenuptial agreement can make an excellent wedding gift, according to one financial columnist.

Replying to a reader query this week, Bruce Williams of Smart Money advised a female reader that having a prenuptial agreement in place before a marriage can be a wise course of action to take.

Quite simply, he explained, this means that the couple will enter into their new life together with documents outlining that "what's his is his and what's yours is yours".

Prenuptial agreements, he added, are particularly advisable when one partner has considerably greater assets than the other - including lump sum profits from the sale of property, long-term savings, investments or an inheritance.

Having a frank and honest discussion in which both partners share their financial details is essential in the process of preparing a prenuptial agreement, as is seeking appropriate legal guidance before any documents are signed, he advised.

"Both of you have to be represented by counsel and be completely honest," Williams explained.

The ABS estimates that based on the crude divorce rate in Australia between 1901 and 2006, an estimated one-third of the country's marriages will end in divorce.

Married couples, as well as those living in de-facto or same-sex partnerships, can enter into a financial agreement at any time to protect their assets - prenuptial agreements are the financial agreements entered into before marriage.

These agreements specify the financial settlement each party is to receive in the event the couple separates and many people find that having this type of arrangement in place offers peace of mind.

Generally, financial agreements entered into prior or during a relationship take away a party's rights to apply for a financial settlement in court.

A trusted family lawyer should advise on how this settlement would be achieved if a financial agreement is not put into place and whether an individual will be better-off or worse-off as a result of the arrangement.

The advice should not only cover the agreement's advantages and disadvantages, but also the rights of both parties.

As financial agreements must be drawn up with great care and attention to detail - including the fulfilment of a number of technical requirements - consulting an experienced family lawyer is essential.

In fact, each party is required to obtain independent legal advice before the financial agreement is finalised.