Family lawyers say there's growing interest in 'prenups'. Here's how they work

While pre-nuptial agreements, often referred to as "prenups", feel par for the course in celebrity circles, they can be relevant for ordinary people too.

There has been a "big uptick" in interest at the large national family law firm where Yianni Kordos is a principal lawyer.

He says for couples (or former couples), it's important to consider the "cost versus value", in their circumstances, of obtaining an Australian version of a "prenup".

Called binding financial agreements (BFAs) in Australia, they take time and money to acquire.

Here's how they work and when they might be relevant to use.

Quick jump to:

• How much does it cost?
• Do financial agreements 'hold up'?
• Why might you use one?
• Why would you get one after a split?

So, is a BFA just another name for a 'prenup'?

While BFAs are colloquially referred to as "prenups", associate professor in law at University of Technology Sydney Miranda Kaye says that term is a bit inaccurate because they are more broadly used than just before a marriage.

"They're essentially a contract that can be done before, during or after a relationship."

And marriage is not a requirement, Ms Kaye says. De facto couples or "to be" de facto couples have also been able to enter into a BFA since 2009.

A BFA is "a contract between you that deals with your assets … and how they're going to be distributed in the event that you aren't together anymore," Perth-based family lawyer Ella Hickman explains.

If done correctly they remove the Family Court's jurisdiction to come in and say how to divide assets, Ms Hickman says.

How much does it cost?

Research into the use of financial agreements made before or soon after marriage or entering a de facto relationship, conducted by Ms Kaye and other academics, involved interviewing 40 family lawyers in Sydney.

While they didn't all disclose the cost, most of the solicitors interviewed said they charged a minimum of $10,000 to create a BFA, Ms Kaye says.

Mr Kordos says a "straightforward" contract without back-and-forth negotiating can cost between $4,000 and $5,000.

But when lawyers create a BFA they are only representing the member of the relationship who instigates the BFA, and Ms Hickman says a lot of people fail to factor in the cost of independent legal advice for the second signatory.

"The other party actually has to go to a different lawyer and have them review it, have them potentially make changes, enter into some negotiations, give you your advice, and then sign the certificate of advice … [for that work] you're probably not getting heaps of change from $5,000".

Ms Kaye says it's in the interest of whoever proposed the BFA to ensure the other party gets a good solicitor and it's not unusual for the party who proposed the arrangement to cover those costs.

Do financial agreements 'hold up'?

It's hard to make generalisations about BFAs because part of their appeal is that they're so private, Ms Kaye says.

"There's no register of [BFAs]. We have no idea how many are being done. We have no idea what percentage of those are going to court or even being disputed or complained about. It's simply a black hole."

The only ones we see are the ones that "go wrong" and go to court, she says.

The financial agreement could be challenged if both parties do not receive independent legal advice, Ms Kaye says. The advice also needs be "effective" or "good", she adds.

A BFA could also be set aside if it's signed under duress or undue influence.

Ms Hickman says she often gets inquiries from people who have been asked to sign a BFA a few weeks out from their wedding.

"It's really risky that close to a wedding," she says. And she recommends they come back when they're married and that pressure isn't there.

A financial agreement could also be challenged if there is a significant change in circumstance or because of fraud, Ms Hickman says. For example, if someone misrepresented their assets and liabilities.

Ms Kaye says BFAs are a very complex area of family law, and they can also be set aside on technical grounds.

"If they just have been done under the wrong section of the Family Law Act, or if they haven't complied exactly with the statutory terms, then they can be overturned."

While BFAs can be challenged in some circumstances, Mr Kordos says anyone entering into one should treat the document as binding.

When is it worth making a financial agreement?

BFAs are usually entered into when one person has more to protect than the other, Ms Hickman says.

This could be because someone has been a "really good saver" or already bought property or because their mum and dad have helped buy their first house or they are likely to receive a big inheritance, Ms Hickman says.

It's also common to see people entering into a second serious relationship who maybe feel they've been "screwed over the first time" signing a BFA, she says.

And while the cost and conversation that BFAs require does scare people off, she says "if you do split up and have a big fight in the family court, $10,000 to $20,000 [for a BFA] is probably not going to look too bad."

Why would you get a BFA after a split?

Ms Kaye says a BFA that is made after a relationship ends is "quite different" and you could think of them as equivalent to a consent order.

Privacy is one reason a separated couple might choose to enter a BFA, Ms Hickman says, as some people don't like the idea of their name appearing on a court list or in a public courtroom.

She notes that unlike the Family Court of Australia, a BFA has no obligation to fairness.

"I would say the biggest red flag for me when clients come in and say, 'we've separated and my ex has given me a BFA to sign.'

"My ears kind of prick up a little bit because I [think], there might be something that's … inherently unfair in this agreement."

This article contains general information only. You should consider obtaining independent professional advice in relation to your particular circumstances.