March 11, 2016 taxitime

George Costanza’s prenup didn’t work because he didn’t have any dough…but what if he did?

Remember poor old George Costanza from Seinfeld who tried to get out of a defacto relationship by suggesting to his Partner a prenup agreement when they married. It backfired on George of course because he had no dough!

Think of de facto partners, each with money,  who have been together for several years and they both wish to enter into a Binding Financial Agreement ( pre-nup type ) but they are not sure about whether they will marry? This is a very common situation. A recent judge’s decision tells us that they do not need to have two separate agreements!

The Court was asked to determine the validity of a Binding Financial Agreement ( BFA )  that was expressed to be made both during a de facto relationship and during a marriage. At the time the parties entered into the BFA, they were in a de facto relationship and were unsure as to whether they would marry.  To ‘cover all bases’, they instructed their respective lawyers to draft the BFA to also operate if they married. Some years later they married; however, they later separated. Following separation, the husband applied to the Court asking it to set aside the BFA previously entered into. One of his arguments was that a BFA cannot deal with more than one of the above scenarios (which is what family lawyers had considered to be good practice).

The Court decided that the BFA was valid and made it abundantly clear that a BFA entered into during a de facto relationship may also be expressed to carry over into and operate after the parties to that BFA marry.

In this age of blended families this is a very important case, one which wouldn’t have helped Mr Costanza but it will help change peoples views on pre-nups.

Pat Mannix, Partner, Paris Financial

Follow me on Twitter @mannix_pat

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