‘Some men might not like it’: Why women are choosing prenups

Michelle* didn’t expect to be spending hundreds of thousands of dollars in legal fees fighting over property with her ex-husband in court – and she doesn’t want to do it again.

If she does meet a new partner, the young mum wants to protect her assets with a binding financial agreement, or BFA, known colloquially as a prenuptial agreement or “prenup”.

“I definitely don’t want to go through this rigmarole again,” she says. “All we’re doing is spending the kids’ money”.

“I would 120 per cent be looking at getting some kind of BFA to protect myself, to protect my assets, and to protect what my kids might inherit as well.

“Some men might not like it … but relationships end. You’ve got to be smart about these things.”

Michelle had “never even thought about doing any sort of BFA” before now. But the tide appears to be turning among her peers.

Jodylee Bartal, an accredited specialist in family law and a principal solicitor at Melbourne firm KHQ Lawyers, says BFAs are growing in popularity among women.

They set out how assets will be split in the event of a relationship breakdown, allowing couples to sidestep a costly and time-consuming court process.

The contracts may be struck at any time before or during a marriage or de facto relationship, or after it sours. Both parties must have independent legal advice before signing.

Wealthy older men seeking to protect their assets from younger new partners were among the first to embrace BFAs, triggering a flurry of litigation in Australia over the validity of agreements forged under pressure.

But they have now been part of the legal landscape since late 2000, following changes to the Family Law Act, and social dynamics have shifted.

‘The genders are reversed’

In one case Bartal is working on, a “much wealthier female has taken over the reins of the family business and has formed a relationship with somebody from school days.

“The wealth disparity in that one is pretty stark. The only difference is the genders are reversed,” she says.

Young couples, including “children of divorce” who witnessed their own parents’ messy break-ups, and couples going into second marriages who have “been there, done that, bought the postcard”, are also keen to negotiate “an exit strategy”, Bartal says.

“They know that ’til death do us part doesn’t always translate in reality,” she says.

“They just want to avoid 18 months and a couple of hundred thousand dollars in legal fees each [in court].”

Once people decide they want to end a relationship, they want a clean break as quickly and painlessly as possible.

Family law expert Jodylee Bartal

Bartal says people are “forming serious relationships a little later in life” and “acting more proactively” to protect their assets.

Among the BFAs Bartal has drafted is one for a young couple. Her client, a professional woman in her late 20s or early 30s, came to Australia on a work-sponsored visa.

“Her parents wanted her to be comfortable here while she’s working in Melbourne,” Bartal says. “They gifted her the entire purchase price of a very nice apartment on the river here.”

Her client’s partner “had a couple of family businesses he was involved in running”.

“Both of them were motivated to protect the contributions their respective families had made to their lives here in Australia,” she says.

“Unhappily, they subsequently separated. All we did is look at the BFA and action a couple of small things and … they went their separate ways quite happily within, I think, a couple of weeks.

“Once people decide they want to end a relationship, they want a clean break as quickly and painlessly as possible.”

Bartal says she has also helped draft BFAs for “boss women” including “a very senior executive” who married for a second time. The wife is making clear decisions to protect her “hard-earned” money, Bartal says.

Not just ‘prenups’

Mae*, the owner and founder of a marketing business valued at about $1 million, endured a traumatic years-long court fight with her ex-husband over property.

He was ultimately unsuccessful in claiming a share of her business, which he did not help run. She is the primary carer of their children and describes the case as “just another form of abuse”. Her ex does not pay child support.

Mae says she had previously thought about BFAs as being limited to “prenups”. She is “so fearful” of living with a new partner in the future because he might seek a share of her assets if they split.

“What people need to be aware of is you need to be considering [an agreement] even if you’re just going into a cohabitation arrangement,” Mae says. “Now I would have to have it in place as an absolute mandatory before someone cohabited with me again.”

Bank of mum and dad

Ben O’Sullivan, director of Sydney firm O’Sullivan Legal, says there is “certainly renewed interest” in these kinds of contracts, and “it’s reflective of demographic change”.

He is drafting more of them for young people where “mum or dad have given them a bit of money” to buy a property before they entered into a relationship.

Financially secure younger women are also more likely to ask a partner to sign an agreement, reflecting “advancements we’ve made as a community in terms of gender equality”.

There are a number of ways a former couple can resolve property matters when they split.

One option that avoids the emotional and financial toll of drawn-out court proceedings is to reach an agreement that is formalised by the court in “consent orders”.

Under the Family Law Act, the court has a duty to “end financial relations” between a couple when making final orders. This is sometimes referred to as the “principle of finality” or the “clean break” principle.

This guiding principle means the court is more likely to make consent orders formalising a couple’s agreement about their financial affairs if they are splitting their assets neatly with no further action required.

Looking ‘over the horizon’

But a BFA presents a second option. These are made entirely outside the court process and can embody a different approach that looks “over the horizon”, O’Sullivan says.

“You might have a young family with a couple of young kids, they separate, [and] the mother can’t afford an independent property,” he says. “We’ll do a BFA for them so that Mum can stay in the house until the kids are 18, and then they’ll sell the house.

“If you can do something which helps those kids maintain their structure and stability and routine it makes you feel good about the work.”

O’Sullivan says that in his practice “we still document most of our agreements through consent orders”, but BFAs have a role to play.

One advantage of BFAs is they can apply for a specified time. O’Sullivan is working on one agreement with a five-year timeframe. It sets out a formula for dividing assets that would apply if the couple separated during that time.

This might be a useful approach for a couple whose relationship is ongoing “but it’s hit rocky ground”, he says because it allows the pair to “work on their love for each other without the finances getting in the way”.

‘Insurance policy’

Geoff Sinclair, a principal of national law firm Barry Nilsson, says court cases involving an “older wealthy male” against a younger woman, potentially from a non-English speaking background, are now less common.

In 2017, the High Court struck down an agreement between a wealthy Australian property developer and his younger wife on the grounds of unconscionable conduct. The court said he met her on “a website for potential brides” when he was 67 and she was 36.

Sinclair says there has been less litigation involving BFAs in recent years because the courts have provided clear guidance.

His main concern with younger couples is that “you don’t have a crystal ball” and it might be unwise to reduce everything to a contract. Sinclair says it makes more sense to “quarantine” specific assets brought into the relationship rather than trying to cover every future eventuality.

A well-drafted agreement, he says, is an “insurance policy that if you do separate, things won’t drag through the courts system”.

Not a ‘post office will’

But Sinclair says there is “still this perception out there that these documents are like a simple will [kit] from the post office”.

Careful drafting and negotiation helps ensure the agreements withstand any court challenge, he says, but there is “an expense to that”.

“The costs that a person would incur in going through the family court system, even just through mediation or negotiation, can be in the tens of thousands of dollars,” Sinclair says.

A BFA might cost between $7500 and $15000 each. “Some could go out to $100,000 each [if there was a lot of complexity] … but that’s pretty rare,” he says.

‘I want to protect my children’

Michelle* says the mental and financial strain of battling with her husband in the Federal Circuit and Family Court was all-consuming.

“I have really suffered a lot trying to keep this show on the road.”

She received a financial windfall shortly before the breakdown of her relationship and wants to protect it if she meets a new partner.

“You don’t ever want to go into a relationship and think it’s going to end, but I want to protect my young children,” Michelle says.

“I would be upfront with them as well: ‘I am bringing this into the relationship, and if I leave, this is what I intend to leave with’.”

She says it would be “a different story” if they built wealth together, but she would expect a new partner to keep his own assets, such as any business or cars he brought into the relationship.

“Whatever the case may be, they’re his.”