Thinking of a pre-nup?
A pre-nuptial agreement (pre-nup) is a legal agreement made between a couple before their marriage. It usually sets out how they wish their assets to be divided between them if they later separate or divorce. It can also detail how they will arrange their finances during the marriage.
Pre- nups sometimes deal with financial provision for existing children, but do not usually attempt to deal with financial provision for any future children. Significant changes in circumstances during the marriage, including the birth of children, are usually dealt with by review of the terms of the agreement; often a review clause is inserted into the pre-nup, setting out when a review of the agreement should take place.
Although the aim of a pre-nup in most cases is to protect assets in the event of divorce, it can be a positive experience for the couple, organising their finances before their marriage, and creating certainty for the future. Often the couple follow the collaborative family law process (using collaborative family lawyers who are trained experts in resolving issues without confrontation), where the couple and their collaborative lawyers meet together to agree the content of the agreement round the table.
The objectives of pre-nups are:
- To clarify how the parties will conduct their financial affairs during the marriage, to enable the couple (especially the financially weaker party) to have transparency at the start of the marriage. This may also assist the financially weaker party to feel financially secure within the marriage.
- To provide certainty for couples who wish to formally agree how their assets should be divided if they later separate or divorce.
- To protect assets (such as inherited wealth or pre-marital property) from a later financial claim.
- To limit scope for uncertain, emotionally draining and financially costly court proceedings in the event of the future breakdown of the marriage.
Pros and cons of nuptial agreements:
They provide clarity and certainty and protect assets in the event of the marriage breaking down in the future;
However, the couple cannot override the court’s broad discretion to decide how to redistribute their assets and income in the event of divorce, as pre-nups are not (yet) part of the statutory law on financial arrangements in divorce. Even so, the court must give appropriate weight to a pre-nup as a relevant circumstance of the case when considering a financial settlement on divorce and it may be that a pre-nup should be given decisive weight. This will depend on the circumstances of the case.
There is a three-stage test for fairness
- The agreement must be freely entered into.
- The parties must have a full appreciation of the implications of the agreement.
- It must be fair to hold the parties to their agreement in the circumstances prevailing.
In summary, a pre-nup can be helpful for the couple, particularly where there is an imbalance in their financial positions, children from previous relationships to protect, or inherited wealth. A pre-nup cannot currently be relied on with absolute certainty, but, provided the 3 stage test for fairness and the qualifying criteria are followed, it can give helpful reassurance to parties committing to marriage.
Our Family team are on hand to advise on such matters and offer a half an hour free appointment. To take advantage of this, contact our team on 0800 160 10 10.