“Why did a certain celebrity marry into a wealthy family yet refuse to sign a prenuptial agreement?”

“How should property be divided in a celebrity divorce?”

“Why did they not receive a single cent after the divorce?”

Whether on legal channels or in the entertainment industry, we always seem to come across trending topics about the division of wealthy family assets, and the prenuptial agreement issues that inevitably come with them.

Some friends have sheepishly but curiously asked, “Do I need to draw up a prenuptial agreement?”

This question is actually quite difficult to answer, because it is a rather personal decision.

At the outset, when two people are preparing to walk into the halls of matrimony, the honeymoon period does not seem like a time to be bound by an agreement, and at times it can even be seen as awkward. At the start of a marriage, everyone hopes the relationship will be long-lasting and stable. However, the world is unpredictable, and if things change in the future, the existence of a prenuptial agreement can greatly reduce the pain of financial loss and avoid the expensive and time-consuming litigation that would otherwise follow a divorce.

So today, let us look at why prenuptial / financial agreements are signed in Australia.

What is prenuptial property?

Whether in China or Australia, a prenuptial agreement, also known as a financial agreement, is a legally binding written agreement. It has become very common and widely accepted in modern society. The main purpose of drafting a prenuptial agreement is to set out the scope of each party’s property and debts, as well as the attribution of rights, in order to avoid disputes in the event of a future divorce or separation.

Chinese law generally defines it as property that one of the parties has already acquired before the marriage is registered. Whether movable or immovable, tangible or intangible, as long as it was legally acquired, it is protected by law.

But Australia is different. As long as, before the marriage or before cohabitation, the two parties have no written agreement of any kind dividing and allocating their property, or establishing a third-party trust relationship, the property of both parties is treated as matrimonial joint property, jointly owned and controlled by both parties, and is divided proportionally on separation based on each party’s contributions and future needs. Therefore, if friends in Australia purchase a house before marriage and the other party’s name is not on the title, they often believe that the property is prenuptial and will not be divided on a future divorce. In fact, this is a misunderstanding.

At the same time, another point worth emphasising is that Australia recognises de facto relationships. Even without a marriage certificate, once the conditions for a de facto relationship are met, the assets of both parties likewise become joint property, and are divided from the common asset pool on separation.

What is a financial agreement? How is it signed?

Financial Agreement / Binding Financial Agreement (BFA for short)

Financial agreements fall into pre-marriage / pre-cohabitation financial agreements, during-marriage / during-relationship financial agreements, and separation / divorce financial agreements signed after separation.

The main purpose of a pre-marriage / pre-cohabitation financial agreement is to protect prenuptial property, while during-marriage / during-relationship or separation / divorce agreements focus on the division of existing assets after separation or divorce. Regardless of the stage at which it is signed, a financial agreement drafted under the Family Law Act is legally binding. A financial agreement requires each party to have their own separate lawyer, to ensure that both parties have received independent legal advice. Apart from this, privately signed financial agreements, property waivers, written undertakings and the like have no legal effect.

Unlike divorce, divorcing in Australia requires meeting the 12-month separation requirement, but a separation / divorce financial agreement does not require the 12-month separation condition to be met, and can be signed as early as at the moment of separation. Handling the transfer of joint property under a financial agreement can exempt the parties from stamp duty on the name change.

Under what circumstances can a financial agreement be overturned?

A financial agreement, as a legally binding agreement, is very difficult to overturn if properly prepared. So in what circumstances can a financial agreement be overturned? The following are three of the more common situations:

First, there was coercion or threatening conduct at the time of signing.

Second, one or both parties did not receive professional legal advice.

Third, one or both parties concealed significant assets.

This is why it is very important to engage a professional, experienced lawyer to handle a financial agreement.

[NS Legal Tips]

If property in an individual’s name is divided without distinguishing between pre- and post-marriage, what about individual debts?

In China, Article 1064 of the Civil Code provides that debts incurred by the joint expression of intention of the spouses, such as where both spouses sign jointly or where one spouse subsequently ratifies the debt, as well as debts incurred by one spouse in their personal name during the marriage for the daily needs of the family, are joint matrimonial debts.

In Australia, there is no fixed formula for how debts are divided between spouses; it depends on the specific circumstances. Simply put, jointly held debts are definitely joint debts, including joint home loans, debts where one party borrows and the other acts as guarantor, and any debts with both parties’ names on them. Any individual debts not incurred for family needs or the benefit of both parties are not joint debts — for example, gambling debts owed by one party, reckless spending, and so on, all of which should be treated as personal debts.

All in all, in a marriage we all hope for harmony and permanence, but legal disputes can still arise when things go wrong. Signing a prenuptial agreement is in fact the most economical and effective way to protect prenuptial property. If both parties can sit down calmly and be honest with one another, and rationally acknowledge each other, the marriage may turn out even better!

If you wish to sign a prenuptial agreement, we recommend engaging a professional lawyer to review and explain the specific details for you!