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Love and money: why a pre-nup can make sense

Older couple will have existing financial commitments. Pic: Getty

Older couple will have existing financial commitments. Pic: Getty

You don’t usually walk down the aisle with the intention of running straight back out of the ceremony.

But the reality is that thousands of marriages break up each year.

Latest Australian Bureau of Statistics figures show that in 2014, about 46,500 divorces were granted in Australia, with the median marriage lasting 12 years.

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In the same year, more than 120,000 new marriages were registered. In 11.5 per cent of those, both partners were marrying for the second time.

So what can you do to ensure you’re protected if the unfortunate happens down the track – and red roses turn into something a little thornier?

Will it be over-ruled?

Family lawyer Gayle Meredith, of Gayle Meredith & Associates, says financial agreements (known colloquially as pre-nups) went out of favour for a time, with the Family Court contesting many pre-nups, or deeming them invalid.

While pre-nups are experiencing something of a resurgence, Ms Meredith says many lawyers are reluctant to prepare them for first-time couples.

Second time around? Bigger assets are involved. Pic: Getty

Second time around? Bigger assets are involved. Photo: Getty

She says pre-nups are most common for those remarrying.

“When people are marrying for a second time, often they’ve been through the Family Court system and found that debilitating and want to make sure that’s not going to happen again.”

Ms Meredith says pre-nups can often be more effective for older people, who have more assets, perhaps want to protect their children and aren’t planning to have any children with their new partners.

However, she believes pre-nups are “not a good idea” for first-timers, unless either party has significant wealth.

“It’s less likely for a young couple who are getting married for the first time, and wisely so, because sometimes these pre-nups can be very vulnerable because there’s the possibility of children, there’s a whole lot of possibilities,” she says.

Pre-nups back in vogue

Financial and relationship counsellor Bernie Bolger says pre-nups are “a really hot topic at the moment”.

She deals with many people marrying for the first time who are pressured by wealthy families to put pre-nups in place.

Ms Bolger also advises against pre-nups for most young couples. She says a pre-nup can cost in the order of $10,000 to $20,000.

“It would cost more to get a pre-nup done well, than the benefit of it,” she says.

No assets means no need to pay for a pre-nup. Pic: Getty

No assets means no need to pay for a pre-nup. Photo: Getty

Ms Bolger says the Family Court will consider three things in any divorce case: what you came into the marriage with, your contribution (not just financial) during the union, and what your future needs are.

“In a short marriage with no kids, the court would say – probably – walk away with what you came with,” she says.

However, Ms Bolger says it’s important to have clear conversations about money well before moving in together or marrying.

If you are going to get a pre-nup, especially for a second marriage, she says writing a letter of intent is a solid step.

Perhaps the letter will spell out that you want to help pay for your children’s education, or devote some of your money to charity. While not legally binding, Ms Bolger says the court will take the spirit of the letter into account.

Unequal opportunity

She says second-time couples with huge disparities in their wealth might also get legal advice to consider other structures, such as setting up trusts.

Ms Bolger says that in a second marriage particularly, both parties have likely experienced life’s ups and downs, and should be aware that their new partner might already have financial responsibilities.

Older couple will have existing financial commitments. Pic: Getty

Older couples will have existing financial commitments. Photo: Getty

Discussions about pre-nups can be framed in a way that doesn’t sour the romance, says Ms Bolger.

For example, she says, you could say: “It’s not that I don’t trust you, but I’ve had 50 years of my life already. I didn’t know you were going to come into my life.

“Any lawyer, or anyone will tell you, that when going into partnership with someone, the most important clause is the exit clause.

“The reality is one in three, or one in two marriages end, and not all end well.”

Having a document in place, which can always be changed down the track, can make parting much less traumatic, she says.

“It causes far more pain if you break up badly than if you break up well.”

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