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Family Law > Australian Family Law Tracker > 2012 > Issue 3, March 2012 > Contents of pre-nuptial agreements
Contents of pre-nuptial agreements, 14 March 2012
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This article was written by Jacky Campbell, partner at Forte Family Lawyers and CCH consultant
author. It will also appear in CCH Australian Family Law & Practice in the Financial Agreements chapter at
¶32-435.
There are some important distinctions between the way in which certain matters can be dealt with in financial
agreements under s 90B, 90C (during marriage), 90UB and 90UC as opposed to agreements entered into
after separation. In particular, there are distinctions with respect to:
• superannuation
• initial contributions
• spousal maintenance — the impact of the legislative provisions appear to mean that there is more
opportunity for the jurisdiction to be ousted in pre-nuptial agreements where both parties are more
likely to be working, not have the care of children and not be in receipt of Centrelink benefits than in
agreements made after separation. These provisions are discussed at ¶32-220 of Australian Family
Law & Practice.
The advice required may also be different. This is discussed at ¶32-610 of Australian Family Law & Practice.
Superannuation
A provision in an agreement which provides for the parties to split any future superannuation may not be
possible to implement without an order of the court made pursuant to s 90MT Family Law Act.
Section 90MH(1) says a superannuation interest does not have to exist when the agreement is made but s
90MJ(1)(a) requires the interest to be identified in the agreement. How can an unknown future interest be
identified?
Section 90MI(1)(b) allows a split if the agreement specifies a method for calculating the base amount. A
formula can possibly be inserted in the agreement even if the future interests of the parties are unknown.
What about procedural fairness to the trustee? The Family Law Rules 2004 require this for orders but the
Act is silent in relation to financial agreements. Although an unsplittable payment is a ground for agreements
to be set aside under s 90K(1)(g), trustee refusal to implement is not within the definition of an unsplittable
interest in reg 11 Family Law (Superannuation) Regulations 2001. As a superannuation split cannot be
as clearly set out in a pre-nuptial or pre-cohabitation agreement or an agreement during cohabitation or
marriage as in a post-separation agreement or court order, a trustee may be quite justified in refusing to
implement it or the trustee may be unreasonable. This may be grounds for impracticability within s 90K(1)
(c) but do lawyers need to advise clients of this risk? See ¶34-700 of Australian Family Law & Practice and
following.
It is probably theoretically possible to navigate these sections, but luck rather than legal skill may be
required.
Is it possible to make a super-splitting order (to implement the provisions of a financial agreement) by way of
enforcement under s 90G(2)? Probably not, as the order is being created rather than enforced.
Is a super-split in a financial agreement within s 90KA? It is far easier to envisage the court making orders to
transfer, say, shares of entities which were not in existence at separation (under a general provision requiring
that a party transfer shares in all entities to the other) than creating a super-splitting order from scratch.
If superannuation is not properly dealt with in the agreement can s 79 orders be sought to deal with
superannuation? Section 71A appears to prohibit a s 79 order being made, even if not all property is dealt
with.
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Family Law > Australian Family Law Tracker > 2012 > Issue 3, March 2012 > Contents of pre-nuptial agreements
Section 90MS indicates that orders in relation to superannuation interests can be made in proceedings under
s 79 or 90SM. A court cannot otherwise make an order under s 79 or 90SM in relation to a superannuation
interest (s 90MS(2)).
Initial contributions
Agreements may attempt to quarantine initial contributions when there are many uncertainties such as
whether the parties will have children, the length of the relationship, and the incomes, health and earning
capacities of the parties in the future.
Instead of completely quarantining initial contributions, it may be appropriate and less risky to quarantine
them for a short period only or until the birth of a child. This is known as a “sunset clause”. Alternatively,
the agreement can, by stages or steps, reduce the amount of protection given to initial contributions and
increase the entitlements of the party who made less initial contributions. The main difficulty with staged
entitlements is that these agreements are more complex, and therefore costly, to negotiate, draft, interpret
and implement. Another option is to leave open the ability of the parties to apply for spousal maintenance. By
not ousting the jurisdiction of the court to make periodic or lump sum spousal maintenance orders, the Court
is left with the ability to address the different circumstances of parties after separation and take account of
their different needs.
Whether or not seeking to protect the whole value of an initial contribution or part of it, definitions are
important. The agreement needs to be clear as to what initial contribution is being protected. Is it:
(a) The dollar value of the asset at the date of the marriage or cohabitation? This means the initial
contribution is still protected even if it is converted to another asset or mixed with other assets.
However, over a period of time the real value of the initial contribution will diminish.
(b) The asset itself? This assumes that it will not be sold. If it is sold the protection is lost. Any
contributions by the other party, direct or indirect, are ignored. This may result in a particularly
unfair outcome to the other party if there are few other assets or if significant contributions have
been made by the other party to the asset.
(c) The asset, and if it is sold, its value traced into other assets either as a dollar value or as a
percentage?
(d) Another formula?
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