Marrying later in life. De facto relationships. Second and subsequent marriages and other significant relationships. When your life melds with another, it necessarily gives rise to the question: what happens if it doesn’t work out? This is a particularly important consideration when partnering or re-partnering in your 30s, 40s and beyond, when you’ve accumulated assets and are hopefully enjoying the fruits of your hard work. Protecting what you’ve worked so hard to build becomes a critical factor.

We frequently provide advice on the benefits of entering into a ‘prenuptial’ or ‘continuing relationship financial agreement’ (also known as a binding financial agreement (BFA)). Our advice typically includes:

• confirmation they are an effective ‘insurance policy’ to protect property from the spectre of a relationship breakdown;
• confirmation they provide clarity and avoid stressful and expensive family law negotiations and court proceedings; and
• outlining the practical steps to set up a BFA. It is not as simple or inexpensive as a Will – there is a bit involved! But once done, it is done.

However, advice alone is not always enough to drive home the benefits of a BFA. Which is why our advice also includes practical examples to illustrate what the world looks like without a BFA.

So here is an example. The facts described here are based on an amalgamation of real client experiences (names have been changed to protect identities). If you are put off by the thought of cost, hassle and the odd hard conversation when it comes to setting up a BFA, please read on.

Julia meets Chris

Julia is 44. She owns and manages a successful gym business with a comfortable income. She owns her home, as well as the business she runs, and has investments worth approximately $1.5 million. She has two adult children who live with her but who are both working.

Chris is 46. He has a teenage daughter who does not live with him. He works as a contract welder with a comfortable income. He has a little cash and super worth approximately $50,000. He has possession of several classic cars, however they are not registered in his name and Julia is unsure who actually owns the vehicles. Chris says they are not worth much.

Julia and Chris met online and commenced dating at the start of 2019. Julia found Chris to be charismatic and charming, which appealed to her. In June 2019 Chris asked and Julia agreed for him to store several cars and other possessions at her house, which took up a lot of space. Chris started paying an agreed amount of $1,500 per month to Julia for this inconvenience.

Chris started staying over more at Julia’s house, but not always. They became engaged in December 2020, and married in June 2021. From this point on, Chris lived in Julia’s house.

During the marriage

Once living together full time, it became clear that Chris consumed a significant amount of recreational and performance enhancing drugs. He could be very moody and aggressive, and spent a lot of time at the gym (being the business that Julia owned). Without seeking Julia’s approval or agreement, Chris started making management decisions regarding the gym, often used his own credit card to make purchases for the gym, and when talking to employees and members of the gym, did so as if he owned it.

The relationship ends

The relationship deteriorated, and in December 2022, after a significant argument, Chris started sleeping in the spare room. Julia informed him that the relationship was over and asked him to leave the house. Chris refused. He continued to regularly attend at the gym uninvited, and around friends and employees he behaved like the relationship was still ongoing. In June 2023, following some further violent arguments, Julia, obtained an intervention order against Chris, leaving him with no choice other than to leave her house. Chris had continued to make the monthly payments for storage of his classic cars, up until he left the house. The vehicles were then removed from the home.

Proceedings are issued

Six months later, Julia was surprised and dismayed when Chris commenced property proceedings, seeking that control of the gym business be transferred to him, and that he receive a payment worth 40% of the total property of both parties. Julia was further surprised when Chris asserted that they started living in a de facto relationship in June 2019 and remained married until June 2023, a period of four years. Julia sought legal advice and believed the length of the relationship was for two years spanning from the time they became engaged in December 2020, until they started sleeping in separate rooms in December 2022 (at which point Julia had told Chris the relationship was over).

Julia received further nasty surprises. On seeking legal advice, she learned that whilst nowhere near what Chris was claiming, it was likely that he had a legitimate claim to a percentage of her property (in the range of 20%). Based on this advice Julia made several offers to Chris. He refused the offers, and after many delays, her matter reached a final court hearing. At the door of the court, Chris finally accepted an offer. Julia was advised that it was likely more than he would receive if the court heard the matter, but at that stage, Julia was at the end of her tether – she did not wish to face a week-long court hearing, followed by a 3 month delay until the judge’s verdict was delivered. She wanted the matter concluded.

The final outcome

In total, Julia parted with half a million dollars in legal fees and the settlement payment to Chris. She also suffered significant ill health throughout the period of the court proceedings, due to the stress of dealing with the process. The business also suffered as Julia was not able to focus on it.

What would have happened if there had been a BFA?

Back in June 2019, when Julia’s long serving accountant first met the charismatic but pushy Chris, he immediately and prudently advised Julia to enter into a BFA. When Julia spoke to Chris about this, he refused to entertain the thought and made a lot of noise about trust and love. Julia let it be.

But now Julia wishes she had not let it be. If Julia had held firm when Chris refused to entertain the idea of the BFA, and assuming the relationship had continued with the agreement in place, the BFA would have quarantined the property she had worked so hard to accumulate over her life. Separation would then have been a far easier and cleaner process, would have saved Julia significant time as well as money, and would have been a less stressful experience overall.

Contact us

I hope this article has helped to illustrate how a BFA would have protected Julia in practice. Please do not hesitate to contact myself or another member of our Family & Relationship Law team if you would like further information about, or assistance with, the preparation of a BFA.