The great pre-nup dilemma – can you afford to be without one?
Sensible insurance policy or total romance killer? A top solicitor at Paris Smith in Winchester talks us through the pros and cons of pre-nuptial agreements.
In the glorious, glowy days of being engaged, thoughts of pre-nups couldn’t be further from our minds. Romance killer or what? But is bringing up the idea with your soon-to-be-betrothed a sign of mistrust – or a declaration of confidence? And with latest figures showing divorces rates are at an all-time high, if things don’t work out, can you really afford to be without one?
Not exactly sure what they are? Us neither – but with more and more married couples now signing up, it could be an area of family law worth thinking about. We asked Danielle Taylor, Associate at Paris Smith solicitors in Winchester to give us the lowdown. Danielle, it’s over to you…
Pre-nups and Post-nups – why now?
Pre-nuptial agreements are on the rise. Traditionally, they were not enforceable in England and Wales. However, law has changed and these agreements are being increasingly used.
There are two types of nuptial agreements. Pre-nuptial agreements (entered into before saying “I do”) and post-nuptial agreements (made after the marriage). These agreements are made between a couple regarding their respective property and support rights in the event of death (in combination with wills) or divorce.
Sometimes, a nuptial agreement will also deal with property rights during the marriage (e.g. setting out how property is owned and used, including any distribution of rent/dividends etc).
Why get a pre-nup?
Pre-nuptial agreements are usually used to protect the interests of a spouse who has (or is about to acquire by way of a contract, inheritance, gift or other means) substantial assets, such as those with businesses or property. While these agreements are usually to the benefit of one of the spouses in particular (usually the wealthier party), they can aim to protect both parties (as both parties may have pre-marital assets to protect).
Pre-nuptial agreements are common in many second (or third, or fourth) marriages after assets have been acquired (or reduced) due to a previous divorce or death (once bitten, twice shy).
It can be seen as similar to taking out an insurance policy (although it’s a legal agreement and not insurance). You don’t expect your home to burn to the ground, but you protect against that with buildings insurance. You don’t expect a relationship breakdown, but you may wish to protect against financial claims by way of a pre-nuptial agreement.
Like other non-compulsory legal agreements, there are a number of pros and cons to think about when considering whether to enter into a pre-nuptial agreement.
1/They can protect assets from being shared/dealt with upon death or divorce. The aim is to prevent certain identified assets from being considered by the court, sold or transferred within any future proceedings.
2/They can set out what is “matrimonial” (assets accrued during the marriage which might be shared) and what is not to prevent arguments and signpost the intentions of the parties.
3/They can protect assets belonging to one party from being used to satisfy the debts of the other.
4/They provide a level of clarity and transparency in respect of financial matters prior to the marriage (so you both go into the marriage with your eyes wide open and aware of your respective financial positions).
5/They can provide some level of certainty on relationship breakdown, as it’s already been agreed who should have what. This can mean saving on future legal costs.
6/They are a clear record of discussions and agreements at the time of the document, which can be useful down the line when recollections may be inaccurate and parties are in conflict.
7/They can be a useful tool for any future negotiations, as they may signify the priorities of each party.
8/They enable parties to have the autonomy to make their own decisions in respect of how their assets, pensions and incomes should be dealt with, including how they would like matters to be determined if there is disagreement in the future (such as arbitration or mediation).
9/They have to be taken in to account by the court. As long as the agreement was properly arrived at and remains fair, the court should follow it.
1/They don’t prevent either party from applying to the court for financial provision on divorce.
2/They do not prevent the court from making financial orders.
3/They can disadvantage the financially weaker party.
4/They may need to be kept under regular review to ensure that they remain fit for purpose (incurring future legal costs).
5/They may be less effective if there are significant changes in financial circumstances (such as the birth of children, significant inheritances, significant promotions etc).
6/It’s sometimes difficult to negotiate what can be seen as a clinical legal document in the run up to the happy day.
7/They may lead to an earlier relationship breakdown – for example, if one party has not been transparent about financial circumstances or does not wish to enter into the agreement. However, some would say that this is also a pro, as it may prevent parties from entering into a marriage which is likely to encounter significant difficulties.
8/In the case of life-long and successful marriages, the document may not be used.
Are pre-nuptial agreements strictly enforceable?
The court is not strictly bound by a pre-nuptial agreement when making orders on divorce. However, the existence of a pre- or post-nuptial agreement is a fact that any judge will need to take into consideration. If the agreements achieve fairness and are executed in accordance with the Law Commission and Law Society guidance, the courts are likely to be persuaded to uphold them.
Should I hold off and get a post-nup later if I need it?
The disadvantage of post-nuptial agreements versus pre-nuptial agreements is that they take place after the marriage. This means that if one party refuses to enter into the agreement, you are already married and financial claims may already be available (versus having protection before the marriage or potentially deciding not to move forward with the marriage without a pre-nuptial agreement).
Having the best document
If you are seeking the best agreement, when entering into a pre- or post-nuptial agreement, you should ensure that:
1/There has been transparency and disclosure of both parties’ respective financial positions.
2/The document is contractually valid (no fraud, duress, undue pressure or misrepresentation).
3/Both parties have the benefit of legal advice.
4/It’s intended to be a binding agreement.
5/The terms of the agreement are not fundamentally unfair (and will meet needs in consideration of Section 25 of the Matrimonial Causes Act 1973).
6/It confirms the intended jurisdiction for proceedings.
7/It is executed as a deed (in the presence of a witness). This is a technical legal point in relation to the type and execution of a document.
8/The pre-nup is executed no later than 28 days prior to the marriage.
9/It’s reviewed on a relatively regular basis (for example, every five years) or in the event of any significant changes to the circumstances.
Where agreements are made in accordance with this guidance and meet both parties’ reasonable needs (and those of any relevant children), your pre-nup will be a very persuasive document.
Ultimately of course, the hope is that your pre-nuptial document never has to be relied upon. But the certainty of knowing that it’s there can be reassuring. For that reason, for those with substantial assets in particular, it’s well worth considering and taking legal advice at an early stage.