Have you left it to late to do a Prenup?
The following article was written by Colin Abernethy
It is common for couples to contribute different amounts when purchasing their first family home. Many think that a prenup (aka “Contracting Out Agreement”) would be a good idea to preserve their respective contributions as their separate property (just in case the relationship doesn’t last, or there may be children from a prior relationship to consider). Purchasing a property however can be a busy and stressful (not to mention expensive) time and having the awkward prenup conversation is often put in the too hard basket.
The problem is that time flies, and the longer it’s left, the more expensive the process can become. If a prenup is on the cards try and see a family lawyer and have the Agreement completed well within the first 3 years of the relationship. If the Agreement is securing an inheritance payment, gift or a distribution from a Trust as separate property, try to complete the Agreement before you receive the funds (if possible) or immediately upon their receipt.
The equal sharing provisions of the Act apply once the parties have been in a qualifying relationship (de facto / marriage / civil union) for 3 years. The family home (if owned by one or both of the parties) is without doubt one of the assets to which the equal sharing provisions apply.
What advice do you need?
Both parties to a prenup require independent legal advice. A lawyer is required to give their client their professional opinion as to the fairness and appropriateness of the Agreement as well as explaining its effects and implications. More than a mere explanation of the terms of the Agreement is needed. What is required is an informed professional opinion as to the wisdom of entering into the Agreement in the terms proposed.
Why will it be more expensive if you leave it for a while?
The increase in expense will be based on the increase in time that your lawyer needs to take to give you the requisite advice and complete their certification. If a couple has been together for 3 years (and they haven’t done a prenup), both will usually be entitled to a half share of the family home whenever it was purchased and regardless of any unequal contributions.
The lawyer who represents the party who has contributed less (but by virtue of the length of the relationship is now entitled to a half share) will likely advise against signing the Agreement as it will usually mean signing away a large sum of money to the other party.
Rather than a 1 to 2 hour meeting for independent legal advice, multiple meetings may be required, with the solicitor’s advice being put in writing to the client as well as the verbal recommendation against signing.
This is not to suggest that if a couple has been together for longer than 3 years a prenup is no longer possible. In theory it is never too late to do a prenup (so long as the relationship has not ended) but the longer a couple waits, the more expensive the process will become.
If you are purchasing a property with your new partner, your respective contributions are unequal and you want to enter into a prenup, try to sort it out at the time of purchase. If you want to keep an inheritance, a gift or a distribution from a Trust as your separate property then try and sort out the prenup prior to (if possible) or immediately upon receipt of the payment.
The prenup conversation can certainly be an awkward one, but the earlier you have it, the quicker and cheaper the process should be.