A prenup, or to use its technical term "Contracting Out Agreement," may be one of the most important documents you'll ever sign. Approximately 10 per cent of couples have them, and they are becoming increasingly popular.

A prenup allows you to contract out of the Property (Relationships) Act and set your own rules for division of property on the separation of a relationship and/or death. The Act’s equal sharing provisions will generally apply unless you decide to "opt-out" by entering a prenup. Not only can agreements be entered into between a husband and wife, but also civil union partners and de facto partners. Usually, they are signed before a relationship starts, although they can be signed during the relationship (aka the "mid-nup"). So why consider one? It is the cheapest, most flexible and effective way of protecting existing and future assets from a new partner.

Unless a signed prenup is in place, relationship property will generally be divided equally when you marry or enter a civil union or after three years if you are a de facto couple (subject to limited exceptions).

The implications of equal division not only apply to the end of a relationship but in the event of the death of one of the partners or spouses. The surviving spouse has the right to choose between the division of relationship property under the Act or to alternatively take any benefit provided to them under the Will. This could result in the terms of your Will being overridden.

Prenups are especially important to protect existing property brought into a relationship, or to ringfence differing contributions to a future family home. They can be used to specify any property that you wish to remain separate in the event of separation which may otherwise become 'relationship property' during the relationship.

As an essential part of any effective succession plan, they can be used to confirm the status of assets before transferring them to a Family Trust. They can also be used to protect inheritances, gifts and trust distributions.

A prenup can also ensure that assets from your previous relationship will pass to your children from that relationship rather than automatically passing to a new partner or their children.

A prenup can last for a finite time (for example 5 years) or can include a 'sliding scale' that specifies incremental levels of entitlement to property otherwise specified as the separate property of one of the spouses. The sliding scale can take into account the duration of the relationship and/or as defining events occur, such as marriage or children.

For prenups to be valid, they must be in writing and signed by both parties after they have separately received independent legal advice. The same lawyer cannot act for both parties. The lawyers must witness their client's signature and certify they have explained the effects and implications of the agreement and provided independent advice.

Valid agreements can only be set aside if they become "seriously unjust." The Court considers the terms of the agreement, the length of time since signing and whether it has become unfair or unreasonable, and balances those against the need for certainty.

Agreements should be flexible and forward thinking. What is fair at the start of a relationship may be unfair later if one party has stopped a career to raise children, or moved cities to support their partner, and this is not compensated for in the agreement. Existing agreements should be reviewed periodically to make sure they keep pace with changes in the relationship.

While you may wish to avoid that potentially awkward conversation with your partner, a good, well thought out and simple prenup can provide both parties with certainty and security. So, it's worth considering an agreement to ensure your assets are protected no matter what happens in the future.