Brangelina – An iron clad pre-nup? No such thing!

I was slightly amused by the headline in an article in the Huffington Post I read today which made reference to Brad and Angelina’s “iron clad pre-nup”. 

The article made reference to what the gossip web site TMZ has published regarding what Angelina Jolie gets in terms of joint property from her relationship with Brad Pitt under a pre-nuptial agreement that they have apparently entered into. 

I’m going to go into what the article says about who gets what – you can read it for yourself here. 

What really caught my eye was the notion that this pre-nup is apparently “iron clad”. Now I won’t for one minute try and and say that I am an expert on American Divorce Law as I’m not. The United States of America does not have a federal family law system like Australia does. Each state dictates its own laws on marriage (opposite sex or same sex), parenting arrangements, and “filing” for divorce. Some states have “community property laws” which means that upon marriage, anything that one spouse owns may become joint property. If someone wants to keep what property they bring into a marriage separate, a pre-nuptial agreement can be used to “contract out” of the family law jurisdiction of the particular state.

This is much the same in Australia. Financial Agreements (we we call them under the Family Law Act) can be made by both married or de-facto couples prior to commencing a relationship, during a relationship, or after a relationship has ended. Since 2001, when these types of agreements became legal, there has been considerable growth in terms of these agreements. They can be useful in many circumstances including:

1. trying to quarantine pre-existing assets from forming part of any later property settlement; 
2. working out what who will get what if a relationship breaks down. This can include the division of property or the payment of spousal maintenance; or 
3. as an asset protection tool in circumstances where there there are third party interests. My favourite example of this is in rural families where a number of members of the family work together in partnership on the family property. 

I’d be extremely skeptical of any practitioner who gives an “iron clad” guarantee about this type of agreement. I’ve worked for a number of practitioners who have specialized in these types of agreements and one even wrote the Australian chapter in the book of international pre-nuptial agreements. I can recall his advice to clients that we can be in “uncharted waters” at times as these types of documents: 

1. can be extremely technical in terms of their drafting; 
2. require parties to make full and frank financial disclosure (or as one of my father’s barrister friends puts it “lifting your kilt” about what you have in terms of property, superannuation, etc…); 
3. require parties to have good advice about what the agreement provides for, the advantages and disadvantages of the agreement, and how you are basically signing away your rights to have a court determine your property settlement or spousal maintenance in the future; and above all 
4. require the parties to live by their agreement and make sure that they put what it says into action. 

For financial agreements to be binding under Australian law, they need adhere strictly to the legislative requirements and both parties need to have independent legal advice to make them binding. A Court can still set these types of agreements aside. So they are by no means “iron clad” as the legislation provides that they can be a set aside if there has been insufficient financial disclosure, if one party has used undue influence on the other to get the agreement signed (like threatening that there will be no wedding if it isn’t signed), or there has been some other miscarriage of justice. 

Over the past 5 years, the courts have been full of cases where parties have tried to set these types of agreements aside. This has resulted in legislative amendments about how these types of agreements are drafted and the type and quality of advice that parties require to make them effective. There are more amendments to come later this year. Which will apparently simplify these types of agreements. Unfortunately, in my experience some of the issues relating to financial agreements result in inexperienced practitioners trying to do these types of agreements “on the cheap” and cutting corners.

Many practitioners will no longer prepare “pre-nuptial”-style agreements given the issues (mainly insurance related) that can occur with them if they fall apart. These issues might not come about until a relationship ends, and this can be many years after the original agreement was prepared and signed.

If you think that a financial agreement (pre-nuptial or otherwise) is something that you might want to consider, make sure you get specialist legal advice from a practitioner who understands and has experience with these types of agreements.