Usually a prenup will include a clause providing that either or both parties give up their right to make a family provision claim. But do these clauses actually prevent your partner, or former partner, from claiming family provision?
Prenup May Prevent Claim if Approved
A prenup, or a Binding Financial Agreement (BFA) as they are known in Australia, is a contract between two persons in a relationship setting out their agreement concerning the division of their property and finances in the event of separation.
A prenup can prevent your partner, or former partner, from claiming family provision, by including a clause to the effect that either or both parties give up their right to make a family provision claim against the other's estate. However, in NSW, a prenup does not automatically prevent the Court from hearing a family provision claim. Rather a prenup will only be effective in preventing a family provision claim if the Court approves the release of rights under section 95 of the Succession Act.
Per section 95, in determining whether or not to approve a release of rights the Court should have regard to the following:
- Whether the release was financially advantageous to the realesing party at the time it was made;
- Whether it was prudent for the party to make that release;
- Whether the provisions of the agreement were fair and reasonable at the time it was made; and
- Whether the releasing party received independent advice.
The deceased, Jarrod Dark, died on 1 September 2014. His will left his entire estate in equal shares to his three children to be held on trust until they turned 25. No provision was made for the deceased’s wife, Joeanne-Marie, and predictably, Joeanne made a family provision claim.
The Relevant Facts
Joeanne and the deceased commenced a de facto relationship in 2003 and were married in 2008. While Joeanne and the deceased separated in 2012, they did not divorce, and they maintained an ‘on and off’ relationship until the deceased's death. There were two children of the relationship, and both parties had other children from other relationships.
Following their separation, Joeanne and the deceased signed a BFA under section 90C of the Family Law Act. Importantly, clause 8 of this agreement provided that both parties release their rights to claim family provision from the others' estate. The executor of the deceased’s estate applied to the Court for approval of the release of rights in the BFA under section 95 of the Succession Act to prevent Joeanne’s claim.
Did the Prenup Prevent Joeanne from Claiming Family Provision?
Here, the Court considered the section 95 factors and declined to approve the BFA between Joeanne and the deceased, noting the following:
- The deceased had failed to properly disclose assets which would have been subject to a Family Court order. As the provisions of the BFA, therefore, did not contemplate those assets, it was not advantageous or prudent for Joeanne to enter into the agreement, nor were the provisions of the BFA fair and reasonable.
- The agreement was prepared by the deceased’s lawyer with no input from Joeanne, and while Joeanne did receive independent advice, that advice was not informative. Further, the deceased was agitated by suggestions that he had not properly disclosed his assets, and Joeanne knew that failing to sign the BFA would make the deceased angry. Consequently, the Court considered the Joeanne had been coerced into signing the BFA.
As the Court declined to approve the BFA, Joeanne was not prevented from making a family provision claim. In this, the Court held that Joeanne had been left with inadequate provision under the deceased will and ordered that she receive a $360,000 legacy from the estate.
Theoretically, a prenup can be utilised to prevent your partner, or former partner, from making a family provision claim against your estate. However, a provision in a prenup providing that either or both parties give up their right to make a family provision claim will not be effective unless the Court approves the release of rights under section 95 of the Succession Act.
As Dark v Dark illustrates, in determining whether or not to approve a release of rights, the Court will have regard to the circumstances of the case. Generally, a prenup will not be effective if the prenup terms were disadvantageous to the potential applicant, were not fair and reasonable, or where the potential applicant was coerced into signing the prenup.
DISCLAIMER: The information provided above is published for general informational purposes only and is not intended to be nor should it be relied upon as a substitute for legal or other advice.