Binding Financial Agreements (aka “pre-nups”, “during-nups” and “post-nups”) are a way to agree on how to divide up assets if a relationship fails, but a new concept has entered the financial lexicon in recent times: the “pro-nup”.
According to Ratecity, the concept has been developed by the Financial Planning Association of Australia (FPA), as a response to several pieces of research showing that conflict over finances is the leading cause of divorce in this country.
The FPA cites research from Relationships Australia as well as several studies released by banks, showing Australians have a tendency to keep “money secrets” from each other, and that this is detrimental to relationships. Westpac research backs this up with findings that lack of communication about money is significant in separating couples, and further that 36% of relationships are “not in a financially healthy position”. Other banks’ research reveals that “Australia’s top five most frustrating financial behaviours in a romantic partner” are: being careless with cash, telling others how to spend their money, borrowing from others, being secretive regarding finances, and lending money to others.
This has prompted FPA to devise the idea of a new financial plan designed specifically to keep couples together, which it has christened the Pro-Nuptial Agreement, or “pro-nup”. This is a “proactive financial plan intended to help couples achieve their financial goals together”.
The CEO of the FPA, Dante De Gori, explains that the pro-nup is “simply a financial plan with a name and purpose people understand, and need.”
Mr De Gori said most Australians identified as being in a relationship, “…be it engaged, newlyweds, de-facto, same-sex, or mixed-gender relationships … a financial plan from a CFP professional actively removes the wedge money issues can cause in the most promising relationship.”
Couples interested in drafting up a pro-nup would both meet with a certified financial planner (CFP) – “a bit like a couples counselling session about money” – and with the help of the CFP, determine their exact financial situation, their financial goals, and how to achieve them.
You can find out more by visiting the FPA’s Money and Life website.
Other bank research has also recently been published in relation to traditional legal pre-nups or Binding Financial Agreements. ME Bank found that while almost 75% of Australians do believe in the value of BFAs, only 18% have obtained one.
The ME Bank research also provides insight into the demographics of BFA use in Australia. For example, a third of couples in the age bracket 18-24 have a pre-nup, the highest for any age group. Another group of Australians who are proactive in seeking out BFA protection are same-sex couples, with 41% obtaining BFAs. The age group least likely to get a BFA is middle-aged Aussies, with 90% of those Australians aged 40 to 54 not having a BFA.
Experts say a BFA is an important tool for protecting your assets and should be regarded as a kind of “risk management insurance against a relationship breakdown”. While many fear BFAs are unromantic, that concept can actually be turned on its head, if they are regarded as a way to protect your loved one for the future. The agreements have the most value for those who come to relationships with a bit of history, e.g. existing assets. BFAs can then safeguard what has already been built while at the same time, providing for the new circumstances. BFAs are also especially useful for business owners, who can obtain more certainty for the business and work to eliminate risk. They are legally enforceable contracts, but note they must fulfil certain requirements in order to be legally binding and to minimise the risk of it being challenged or set aside later.
Would you like legal advice in relation to drafting a Binding Financial Agreement? If so, please contact Canberra family lawyer Cristina Huesch or one of our other experienced solicitors here at Alliance Legal Services on (02) 6223 2400. If you are interested in the concept of the pro-nup, we would refer you to our highly recommended financial planners, MLC Advice Canberra.
Please note our blogs are not legal advice. For information on how to obtain the correct legal advice please contact Alliance Legal Services.