Few people enter a relationship expecting it to end. However, for business owners, professionals, farmers and those entering a second relationship later in life, protecting assets is often a legitimate and sensible consideration.
Australian family law recognises that couples can make financial agreements about how assets will be dealt with if a relationship breaks down. These agreements are commonly referred to as “prenups”, although they can be entered into before, during or after a marriage or de facto relationship.
Understanding what can and cannot be protected is important for anyone seeking certainty about their financial future.
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What Is a Financial Agreement?
A financial agreement is a private legal contract made between parties to a marriage or de facto relationship.
The agreement can set out how property, liabilities and financial resources will be divided if the relationship ends. In many cases, a properly drafted financial agreement can prevent future disputes and reduce the likelihood of expensive litigation.
Financial agreements are commonly used where:
- One party has significantly greater assets than the other.
- A person owns a business.
- Family wealth is expected to be inherited.
- One or both parties have children from a previous relationship.
- A party wishes to protect assets accumulated before the relationship commenced.
- Family members are contributing funds towards property purchases.
When properly prepared, a financial agreement can provide certainty and help both parties understand their financial position from the outset.
Are Financial Agreements Always Enforceable?
Not necessarily.
Australian courts retain the power to set aside financial agreements in certain circumstances. For example, issues such as fraud, non-disclosure, unconscionable conduct or failure to comply with legislative requirements may affect enforceability.
This is why obtaining independent legal advice is essential. Both parties must receive advice regarding the effect of the agreement and the advantages and disadvantages of entering into it.
A poorly prepared agreement may provide little protection when it is needed most.
What Happens to a Business in a Separation?
Business ownership is often one of the most significant concerns in a relationship breakdown.
Many business owners assume that because a company structure exists, the business will automatically be excluded from any property settlement. That is often incorrect.
The Family Court generally examines the reality of the financial position of the parties rather than simply the legal structure through which assets are held. Shares, trusts, company interests and business assets may all become relevant when determining an appropriate property settlement.
For this reason, business owners should consider asset protection strategies well before relationship difficulties arise.
Does Keeping Assets Separate Provide Protection?
Many people believe that keeping assets in separate names will prevent claims by a former partner.
In practice, ownership is only one factor considered in family law proceedings.
The Court may examine financial contributions, non-financial contributions, homemaker and parenting contributions, future needs and the overall circumstances of the parties. An asset held solely in one person’s name may still be relevant when determining the overall property pool.
Relying solely on legal ownership structures is therefore rarely an effective asset-protection strategy.
Why Early Planning Matters
The best opportunities for asset protection usually exist before disputes arise.
Attempting to restructure assets after a relationship has deteriorated can create significant legal complications and may not achieve the desired outcome. Early planning allows parties to consider their options carefully and obtain appropriate legal and financial advice.
For many individuals, this may involve obtaining advice regarding family law matters before entering a financial agreement or making significant financial decisions.
More Than Just Asset Protection
Financial agreements are not simply about protecting wealth. They can also provide clarity, reduce uncertainty and establish expectations that help couples manage financial issues openly and constructively.
Where significant assets, businesses or family wealth are involved, proactive planning may ultimately save substantial costs, stress and conflict in the future.
Individuals considering a financial agreement should obtain legal advice tailored to their circumstances. Understanding your rights and obligations early can help avoid costly disputes later and ensure that important assets are protected as effectively as possible. For further guidance, Parke Lawyers has published information about property settlement after separation in Victoria and the factors that may affect the division of assets following a relationship breakdown.
This article is general information only and is not legal advice. Specific advice should be obtained for your circumstances.
