Contracting Out Agreements

Contracting out agreements are commonly referred to as prenuptial agreements. They are agreements between spouses or partners on how their assets will be dealt with in the event of separation or death.

The Purpose of a Prenuptial Agreement

The purpose of a contracting out agreement is to “contract out” of what the law says.

There are various reasons why couples choose to enter contracting out agreements. These include seeking to protect assets one person is bringing into a relationship, marriage, or civil union. It can also include couples seeking to keep all their assets and income separate or achieve certainty about what will happen should a relationship end.

Negotiating Fair Terms of Agreement

It is possible for a contracting out agreement to be tailored to suit the particular needs of each couple. Some agreements only deal with one specific asset, while others deal with everything a couple owns now and in the future. They are common where one part brings significantly more assets into a relationship.

They must be signed by both parties and therefore require fair negotiation mediating by legal advisors.

Legal Entitlements & Equal Sharing Laws

Without a contracting out agreement, the law broadly provides for an equal sharing regime if a couple has been living together for three years or more.

There are some exceptions to the equal sharing regime. For example, when a couple has significantly different incomes, respectively, due to how they divided their functions during the relationship (such as parenting roles). Another example is if the relationship is only slightly longer than three years and there has been a significant disparity in the contributions by each spouse or partner.

Regular Reviews to Prenuptial Agreements

It is important to understand that contracting out agreements need to be reviewed over time, as they are not a matter of simply signing an agreement and forgetting about it. As a couple’s circumstances change, the terms of the agreement need to be reviewed to reflect the change in circumstances.

The risk of not reviewing a contracting out agreement at regular intervals is that it could be susceptible to future challenges. Regular reviews of a contracting out agreement ensure the agreement remains robust and its susceptibility to contest in future is minimised.

The Processes of a Contracting Out Agreement

A particular process must be followed to properly execute a contracting out agreement due to certain legal requirements that must be met. One of those requirements involves each spouse or partner needing to obtain independent legal advice. This means you each need to have your own lawyers to advise you.

The necessary advice involves outlining what your legal entitlement would be if you weren’t signing the agreement versus what your entitlement is under the terms of the agreement.

This allows you to understand exactly what you are giving up or gaining by signing the agreement. Undertaking this analysis most commonly involves obtaining various documents as to the value of the assets and liabilities held by each spouse or partner.

Sharon Chandra Can Create a Fair Asset Plan Your Both Parties

Discussing a contracting out agreement can be a sensitive subject. Prenuptial agreements are a great way to ensure and ensure a relationship in the unfortunate event of a separation or death. Sharon Chandra can help you navigate an agreement to suit everyone.

If you would like assistance with a contracting out agreement, please get in touch with Sharon to arrange an appointment.