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When should you consider a prenuptial agreement?

Jul 25, 2022 | Uncategorised

If you’re not all that familiar with prenuptial agreements, they may conjure up for you a world of celebrity and wealth – the preserve of the glitterati, most probably in America.

In fact, prenuptial agreements (or “prenups”) are available to any couple entering into a marriage or civil partnership, regardless of the level of their wealth and income. They’re also increasingly common in the UK. This has been the case since 2010 when the Radmacher v Granatino case upheld a prenup for the first time.

You may already know the ins and outs of a prenup and are more curious to know the answer to the question we posed in the title. But for those of you who are less familiar with them, here’s a quick breakdown.

What is a prenup?

A prenup is an agreement drawn up by a couple before they marry or enter into a civil partnership. It sets out who owns what, and how these belongings and assets will be divided in the event of separation. The prenup is created by the couple after both of them have sought independent legal advice.

The prenup includes an inventory of ownership, but it’s more wide-reaching than a record of who’ll keep the coffee machine. It can include:

  • Property held either solely or jointly (this includes any property other than the shared family home).
  • Business assets. If, for instance, one member of the couple enters the marriage with a pre-existing business, its profits can be ring-fenced in the event of separation.
  • Savings, again whether held solely or jointly.
  • Debts.
  • Income.
  • Inheritance. If any cash or other assets are being set aside to be passed on as inheritance, this can be allocated to one person within the couple.
  • Stocks, shares and bonds.
  • Pensions.

What happens if you divorce without a prenup?

In a marriage, your assets become “matrimonial”. This means that any belongings held by either person become jointly owned. It’s kind of like a joint bank account, but one which includes all income, wealth, assets, and investments.

In this situation, divorce results in these matrimonial assets being divided equally (on the proviso that any children from or before the marriage aren’t harmed by this settlement).

This equal division has the potential to create conflict and resentment if one party feels that more than half belonged to them originally – if, let’s say, they entered the marriage running a profitable business.

The purpose of a prenup, therefore, is to reassure couples that they’re protected financially in the event of separation. It ring-fences assets to stop them from being thrown into the same pot.

Moreover, a prenup is written before marriage, when cool heads are more likely to prevail than in the stress and turmoil of divorce proceedings.

The aim of a prenup is to create reassurance, transparency, and security – a solid legal foundation for a marriage or civil partnership.

When to consider a prenup

As we said before, it’s a common misconception that prenups are only drawn up by the “one per cent” when huge assets are at stake. Any couple can get a prenup, and the assets you’re seeking to protect don’t need to be high in financial value.

The most common reason for considering a prenup is when one partner has more assets – property, business, land, investments – than the other. In this situation, the wealthier of the two would suffer more in divorce proceedings should the assets be split in half. And if some or all of these assets predate the marriage, it could make sense to ensure they’re ring-fenced by a prenup.

A related situation is when one partner has greater expectations of future wealth in the form of inheritance. If they’re expecting a substantial inheritance, it can be protected so as not to become a matrimonial asset.

If one partner has children from a previous relationship, they may want to protect their children’s future inheritance by earmarking it in the event of separation. Some might feel it’s unfair if “their” money is thrown into a shared pot.

These are the key reasons why people consider getting a prenup. A few others are:

  • If you have property or other assets that are tricky to split.
  • If your partner has debts that predate your marriage, the prenup can specify that these belong to them and aren’t to be shouldered together in the event of separation.
  • If you’re marrying somebody from abroad then your divorce proceedings might fall under international law. A prenup has the potential to simplify these complications.

What is the legal status of a prenuptial agreement?

Prenups are legal documents. In the UK, however, they aren’t legally binding – meaning they aren’t automatically enforced by the courts.

That said, they’ll usually be implemented if they meet certain criteria:

  • The prenup was signed freely, with neither party under duress or being manipulated.
  • Both parties sought legal advice separately and were aware of the financial consequences of the agreement.
  • The agreement is “fair” and won’t lead to financial hardship for either party.
  • The agreement won’t lead to any harm being caused to the children of either party.

If the court decides the prenup doesn’t meet one or more of these criteria – if, for instance, they believe that one party was deceived – then it doesn’t have to enforce the document.

This is a disadvantage of getting a prenup and is something to bear in mind. However, if you both freely agreed to sign and you had help from a qualified lawyer, there’s a good chance your prenup will be accepted.

Can a prenup be signed during a marriage or civil partnership?

Prenups are, by definition, drawn up before a marriage or civil partnership – but a similar document, referred to as a “postnuptial agreement” or “postnup”, can be created once you’re already married.

As with prenups, postnups aren’t legally binding, but a court will apply them when dividing assets on the same conditions that we mentioned above.

If you’re looking for help in creating a prenup, or want to find out more about the process, please get in touch. We pride ourselves on being flexible, approachable, and plain-speaking, as well as on tailoring your case to your individual needs.

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