Top tips for couples – pre-nuptial agreements

If you are planning to get married, or enter a civil partnership, you may be considering entering into a pre-nuptial agreement to set out what you would like to happen to your money and property if that marriage or partnership were to break down in the future.

It can be daunting to raise the subject of a pre-nuptial agreement with your partner, particularly when you are both focused on the joyful prospect of the wedding and planning your life ahead together.

We would always recommend that you start the conversation with your partner well in advance of the wedding, to ensure that you have plenty of time for open, honest and sensitive discussions with your partner, and to allow your solicitor sufficient time to draft and negotiate the agreement on your behalf. Discussing financial issues can be one of the most difficult aspects of any relationship; dealing with this beforehand can strengthen your relationship and support good communication during your marriage.

Although pre-nuptial agreements are not currently legally binding in England and Wales, the court is likely to uphold the terms, provided that they are substantially fair, both parties took independent legal advice before entering into the agreement, both parties have provided full financial disclosure of their assets, neither party felt under pressure or duress from the other party, and there was no fraud or misrepresentation by the other party.

There are many good reasons for entering into a pre-nuptial agreement, depending on your individual financial and family circumstances. These include:

• Protection of assets: you may wish to protect or ‘ring-fence’ money, property or other valuable possessions which you owned prior to the marriage, especially if you have substantially greater capital or income than your partner. This includes inherited money or property, gifts from third parties, an interest in a family business, family trusts or property that you purchased before marriage. Such assets can be designated as non-matrimonial property, which means that the court is less likely to award a share of that property to the other party on any future divorce.
• Financial certainty: you and your partner can agree in detail how you would like your non-matrimonial assets and your matrimonial assets to be divided on any future divorce. This can save you both the uncertainty, time and stress of litigating about your finances in future. You will both need to be transparent about your finances so that you know the value of each other’s assets. This can often give both parties greater confidence in one another and the reassurance of having financial security in the future.
• Security for children: if you or your partner have children from a previous relationship, you can make provision to protect their financial interests by ensuring that certain assets are ring-fenced for them. You can also ensure that they will be able to continue living at the family home, if you die before your partner, and who will be responsible for meeting their needs. If you and your partner are likely to have children together in the future, you can specify the arrangements you wish to make for them, both financially and practically.
• Minimising future legal fees: a pre-nuptial agreement is typically less expensive than litigating about the division of your finances if you do later separate or divorce. This step may also help to minimise any acrimony on divorce and result in a more amicable resolution.
• Debt protection: you and your partner can set out how your debts will be dealt with in the future. This can be particularly important if your partner has significant debts – a pre-nuptial agreement can be used to protect your assets from being used to satisfy those debts.
• Protection of business partners: if you have an interest in a family or private business, a pre-nuptial agreement can help to protect that interest and prevent disruption to the business. This could prevent a situation where your partner is awarded an interest in the business and has to participate in its running with family members or business partners, with potentially damaging and far-reaching repercussions.
• Reinforce your will: you can set out what arrangements you wish to make if either of you should die while married, and whether you intend to make a will to provide for each other if you die. People often make a will in conjunction with a pre-nuptial agreement to ensure that the two documents work together most effectively.
• Compensation for loss of career: you and your partner can agree that if, during the marriage, one of you gives up a potentially lucrative career to care for the family, that person should be entitled to a greater share of the assets on the breakdown of the marriage to reflect their loss of future earning power. Provision for ‘compensation’ in these circumstances is more likely to be upheld if it is detailed in a pre-nuptial agreement.
• Flexibility: a pre-nuptial agreement allows you to make a creative plan for dividing your assets if you divorce, and also to review the terms periodically (perhaps every five years) or upon certain future events, such as if you have a child, lose your job or become incapacitated. If your circumstances do change and you feel that your pre-nuptial agreement is no longer appropriate, you can alter the terms to suit your needs.

Ultimately, every couple must make the decision which is right for them. If you do not have sufficient time to enter into a pre-nuptial agreement before your marriage, or it was signed very close to the wedding, you may wish to consider entering into a post-nuptial agreement after you are married. This can be an effective way for you and your partner to set out your intentions for the future division of your assets, or to reinforce the terms of your pre-nuptial agreement.