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Pre-nuptial agreements: pessimistic or realistic?

Ennah Hussain | Benefits of a pre-nuptial agreement

It is often thought that starting married life by entering into a pre-nuptial agreement is both pessimistic and unromantic. However, having the important discussion about what will happen to your assets and income if you divorce or separate has so many benefits and can save significant stress and cost later if the marriage does break down.

A pre-nuptial agreement is a legal agreement entered into by a couple prior to their marriage or civil partnership. It details how the parties’ assets will be managed and treated both during the marriage and in the event of divorce or separation.

Whilst pre-nuptial agreements are not yet legally binding, in cases where certain safeguards are met they are  being taken increasingly seriously by the courts and in some reported cases, parties have been held to the terms agreed.

Generally, the financial circumstances referred to within a pre-nuptial agreement can include properties (both jointly and solely owned by the parties), income, any debts, and specific assets such as vehicles or items of particular monetary or sentimental value or importance, for example jewellery.

Those who own businesses, have significant pensions, or have received large inheritances are often keen to enter into a prenup to protect their assets. Those contemplating a second or further marriage may wish to do so to preserve wealth for their children.

Benefits of a pre-nuptial agreement

Pre-nuptial agreements have many benefits, including:

  • Transparency and certainty: Having open and honest conversations about money before marriage can create a transparent atmosphere, clarify mutual rights and obligations, and help to manage financial expectations. It is good to agree at the outset how finances will be divided, and having a written agreement in place can provide clarity for both parties and minimise the prospect of a future dispute.
  • Economical: Having a pre-nuptial agreement should save couples the time and stress of litigating matrimonial finances in the future, as the proposed division of assets has already been determined within the agreement. Although costs will be incurred in the drafting of a prenup, they are often minimal when compared to the costs of a contested financial matrimonial matter.
  • Protection: A pre-nuptial agreement is useful for confirming what belongs solely to each party and what can be shared. You can specify any assets that are intended to be treated as ‘non-matrimonial’, which each party would like to ‘ring-fence’ (set aside). These commonly include pre-acquired wealth, sentimental gifts, and inheritances. Often interests in businesses, particularly family businesses, are ring-fenced and the agreement can seek to protect that interest and prevent any potential disruption to the asset if the relationship breaks down in the future.

What you include within the agreement is entirely up to you and your partner. It can be modified as often as you like, and it is recommended that you both review it periodically – say every five years, or whenever there is a significant life event such as the birth of a child to ensure that it remains up to date, relevant and fair.

Recent case law has solidified the grounds for the terms of a pre-nuptial agreement to be upheld by the courts. The agreement terms should stand provided the agreement is fair, the needs of each party are met by following the agreement and both have:

  • Received independent legal advice,
  • Freely entered into the agreement, which they intended to be ‘legally binding upon them’, and
  • Fully understood its implications.

Even if a court is of the view that one party’s needs are not met, the existence of the pre-nuptial agreement can help to limit that party’s claim. In other words, the award from that claim could well be less than would have been made if the pre-nuptial agreement had not existed.

Pre-nuptial agreements can be very much worth the paper they are written on, but it is vital to ensure that:

  • Any agreement reached is properly drafted by a solicitor,
  • There has been an exchange of financial disclosure,
  • Both parties receive independent legal advice,
  • It isn’t signed on the eve of the wedding,
  • They both understand the terms of the agreement being entered into, and
  • Neither is pressured into agreeing terms they do not understand or agree with.

How can Ennah help you?

Ennah Hussain is a solicitor in our family department, who advises on divorce and financial issues as well as disputes relating to children. If you would would like help drafting a pre-nuptial agreement or wish to discuss the benefits for you and your partner, contact Ennah on 01274 386 590 or ku.oc1720865704.fcl@1720865704niass1720865704uhe1720865704.

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