If you’re getting married, a prenuptial agreement can help you protect your assets and secure your future.
A prenuptial agreement is like an insurance policy - a legal document that allows you and your partner to agree on a fair and appropriate arrangement for what you would want to happen if your relationship were to break down. It’s a formal agreement about financial arrangements on divorce, so you both know where you stand. Like an insurance policy, the hope is you never need it, but you have the peace of mind that it’s there if you do.
- What is a prenuptial agreement?
- When to consider a prenuptial agreement?
- What can and cannot be included in a prenuptial agreement?
- Are prenuptial agreements legally binding in the UK?
- How long before a wedding should a prenup be signed?
Once you are married, you and your spouse automatically obtain claims against each other in respect of all capital, pension and income resources (whether owned in your joint names or solely). Should the relationship break down, on divorce both spouses should resolve those claims and reach a financial settlement to divide their financial resources appropriately. The idea behind of a prenup is to ‘ringfence’ some of these assets.
Wealth disparity - Prenups are often put in place where there is a disparity between the two partners in terms of assets. The wealthier partner would therefore stand to be disproportionately affected by a divorce if the assets were divided equally between the parties.
Wealth expectation – A prenup can protect assets that do not actually exist at the time of the agreement. This would be relevant where one party is likely to acquire more assets, for example, a future expectation of inheritance or a substantial increase in income.
Inheritance provisions – People entering a marriage or civil partnership with existing children may want to make provisions for those children in their will. A prenup can help preserve those assets so they can later be inherited.
International divorce law – where there is the chance that the laws of another jurisdiction could apply – for example where your intended spouse is a citizen of another country – a prenuptial agreement can determine in which jurisdiction your divorce should be heard.
The above is not an exhaustive list but helps to demonstrate that prenups are not only for celebrity couples with millions of pounds worth of assets and can in fact be useful for many different people.
Prenuptial agreements can cover a host of assets, including the following:
- Property held in sole or joint names
- Savings held in bank accounts
- Business interests
- Inheritance provisions
- Premium Bonds
- Stocks and shares
- Interests under Trusts
It is important to think about all of the assets that you own both as individuals and as a couple, from there you can begin to consider how you would like these assets to be shared on separation.
However, there are certain provisions that are inappropriate to include in an agreement and will limit the extent to which a court will see an agreement as an intention to create legal relations. These provisions include:
- Lifestyle matters – such as the division of labour around the house
- Child maintenance payments
- Child arrangements
Prenuptial agreements are not strictly legally binding in England and Wales; however, they are regarded as persuasive by the courts. The existence of a prenuptial agreement may therefore influence the outcome of an application for a financial remedy.
The Supreme Court has confirmed that a couple should expect to be bound by their prenuptial agreement if it has been prepared in the right way (there are various legal formalities), both entered into the agreement voluntarily and aware of its implications and the terms are fair in the prevailing circumstances.
A prenuptial agreement will never be given effect if it prejudices the reasonable requirements of any minor children of the family.
The Law Commission has made various recommendations about how best to draft a prenup, so it will constitute a ‘qualifying nuptial agreement’:
- The agreement must be a valid contract – the contract must be entered into freely and willingly by both parties. A contract entered as a result of undue influence will be voidable
- The agreement must be made by deed
- The deed must contain a statement signed by both parties stating that they understand that the agreement will take away the court’s discretion to make a financial order, save in so far as the agreement does not constitute a division of assets
- The agreement must have been made at least 28 days before the wedding or civil partnership ceremony
- Both parties should take separate specialist legal advice prior to the signing of the agreement
- Both parties must have received disclosure of material information in relation to each other’s financial situation.
A prenuptial agreement should be signed at least 28 days before the marriage, with all assets and property owned by both parties disclosed.
If this time frame is not possible, it is sensible to also enter into a postnuptial agreement after the wedding.
Please do get in touch with Joshua Coombe of Tees if you would like more information about nuptial agreements.
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