What Is a Prenup and How Does It Work: 7 Important Steps You Need to Know

Prenup: Definition

A prenup, short for prenuptial agreement, is a written contract that you and your partner sign before getting married or entering into a de facto relationship. It sets out what will happen to your property, finances, and sometimes spousal maintenance if you separate in the future.

In Australia, a prenup is usually prepared as a Binding Financial Agreement under the Family Law Act. It is a way to have clear financial arrangements upfront so both of you know where you stand if the relationship ends.

Key takeaway: A prenup is a legal agreement you make before marriage that spells out how money, property, and debts will be handled if you separate.

Why People Choose a Prenup

A prenup is not only for the very wealthy. You might think about a prenup if:

• You already own a home, business, or investment portfolio
• You are entering a relationship later in life and want to protect what you have built
• You have children from a previous relationship and want to safeguard their inheritance
• You expect an inheritance or financial gift in the future
• You and your partner simply want clarity and to reduce the risk of arguments about money later on

A prenup does not mean you expect the relationship to fail. It is more like financial insurance. You hope you never need it, but it is there if things go wrong.

Key takeaway: Couples use a prenup to protect existing assets, plan for future inheritances, and avoid financial disputes if they separate.

What Makes a Prenup Valid

For a prenup to be legally enforceable, it must meet strict requirements under Australian family law. Some of the key elements include:

1. Independent legal advice for both of you
   Each partner must receive advice from their own lawyer. The lawyer explains the effect of the prenup and how it may impact that person’s rights if the relationship ends.
2. Full financial disclosure
   You both need to be honest about your financial position. This usually includes assets, debts, income, and any expected inheritances or business interests. Hiding information can give the other person grounds to attack the agreement later.
3. Voluntary agreement
   A prenup must be signed freely. If one person is pressured, rushed, or threatened, the court may decide that the agreement was signed under duress and should not stand.
4. Proper form and execution
   The prenup must be in writing, signed by both partners, and accompanied by signed certificates from each lawyer confirming that independent legal advice was given.

Key takeaway: For a prenup to hold up in court, both of you must get your own legal advice, be honest about your finances, and sign the agreement freely and correctly.

Can a Prenup Be Challenged?

Yes, a prenup can be challenged in Australia, even though it is meant to be binding. The court can set aside a prenup in certain situations, such as:

• One person did not receive proper independent legal advice
• There was pressure, threats, or emotional coercion to sign
• Important assets or debts were not disclosed
• The agreement is extremely one sided or unfair in light of later events, such as serious illness or caring responsibilities

This is why getting the process right from the start is important. A carefully prepared prenup, with clear terms and proper advice, has a much stronger chance of being upheld.

Key takeaway: A prenup is not bulletproof, but careful drafting, full disclosure, and proper advice make it far more likely to be enforceable.

The Typical Process of Getting a Prenup

Although every couple is different, the process of putting a prenup in place usually follows a similar path:

1. Initial conversation with your partner
   You and your partner talk about why you want a prenup and what each of you hopes to protect or clarify. This step is about openness and expectations, not legal wording.
2. Meeting with a family lawyer
   You meet with a lawyer to discuss your goals, your financial position, and what you want the prenup to cover. Your partner will also need their own lawyer later in the process.
3. Financial disclosure
   Both of you prepare a list of assets, liabilities, income, and any expected windfalls. Bank statements, property valuations, and business documents may be gathered at this stage.
4. Drafting the prenup
   Based on what you have agreed in principle, your lawyer drafts the prenup. It can cover how you will divide property, deal with debts, and whether there will be any spousal maintenance if you separate.
5. Independent legal advice for both partners
   Each of you reviews the draft with your own lawyer. They explain what the prenup means and may suggest changes to protect your interests.
6. Negotiation and finalisation
   If changes are needed, the lawyers negotiate until you both are comfortable with the terms. Once you are both satisfied, you sign the agreement and the lawyers provide signed certificates.
7. Safe storage of the prenup
   Each of you keeps a copy of the signed prenup and the advice certificates. Your lawyer will usually store the original.

Key takeaway: The prenup process involves honest conversations, full financial disclosure, legal advice for both partners, and careful drafting so the agreement reflects what you both want.

A prenup is not about planning for failure. It is about planning for certainty. By understanding what a prenup is, how it works, and the steps involved in creating one, you can decide whether it is the right financial tool for your relationship.