Traditionally prenups have been perceived as necessary only for celebrities or those few significantly wealthy people. The ingrained idea (strengthened by gossip sites and Hollywood movies) is that one wealthy person wants ‘protection’ for if they were to ever split up with their less-wealthy partner.
However, times are changing. Less and less are we seeing men as the breadwinner of the family, while the women stays home with the children. Nowadays, marriage is occurring later in life, often after careers are fully established and both men and women have their own salaries, assets and long term savings.
To add to the complication, both parties are bringing in debt; from university degrees and credit cards, to their own mortgages or even child responsibilities from a past relationship. It’s important to consider whether these assets and debt will become mutual or should an arrangement be made to tackle these disparities?
Unfortunately the statistics show that 30% of all first marriages end in divorce*. With this high prevalence, it’s no wonder prenups or as they are otherwise called, ‘Binding Financial Agreements’ (BFA) are becoming more and more common. As the complications of entering into a relationship are increasing, it is becoming infinitely more difficult to decide on a fair split.
Sue Yorston of Relationships Australia, believes the topic of your finances is just as important as discussions regarding lifestyle preferences such as careers, children or where you wish to live. While some think it is drastic to put a contract to these discussions, generally just opening up these discussions early on can minimise many issues further down the track.
Many believe that a prenup is a smart financial planning decision, as it is common knowledge that financial issues can become very contentious. This is something that should be discussed with your partner and in many cases a Financial Planner can assist. A family law specialist^ recommends thinking of the BFA in a similar light to a will or insurance policy – your personal circumstances and requirements need to be considered and the agreement should be amended when life situations change.
In today’s world where the financial contribution to a marriage is no longer merely “a man’s role”, it’s important to consider whether a contract may benefit your future financial position.
*Australian Bureau of Statistics, 2013
^Nabil Wahhab – York Family Law, Sydney
Source: Capstone Financial Planning.