Over the past decade, Prenuptial Agreements have become increasingly popular, and there are several socio-economic factors behind this trend. People are marrying later; therefore, have often acquired independent wealth and property. More people are also starting up their own businesses, which they want to protect if their marriage does not work out.
For all the above reasons and more (see below), Prenuptial Agreements are no longer the preserve of the top tier of income earners and celebrities. Therefore, if you are about to enter into matrimony, it is important to understand the financial and legal benefits Prenuptial Agreements offers.
What is a Prenuptial Agreement?
A Prenuptial Agreement is a formal legal agreement between a couple which clearly defines how assets and finances will be divided in the event of divorce. Postnuptial Agreements are also available – these work the same as a Prenuptial Agreement, the only difference being they are entered into after the marriage takes place.
The main reasons to draw up a Prenuptial Agreement include:
- One party has significantly more capital or income than the other
- To protect assets owned before the marriage (e.g. those generating from inheritances or a family Trust)
- If one or both parties have children from a previous marriage or relationship and there is a wish to protect assets for future inheritance
- If one or both parties have assets (e.g. property) in another jurisdiction
The motivation for entering into Prenuptial Agreements – Millennials and Baby Boomers
All generations now see the value of Prenuptial Agreements. The millennial generation (those born between 1981 and 1997), may not necessarily have a great deal of accumulated wealth in the form of savings and property (especially the younger ones) when compared to their parent’s, but they are increasingly likely to want to protect intellectual property assets. Also, while they may not have significant capital upon entering a marriage, many young people want to protect their future income, business interests, and inheritances.
Baby boomers on the other hand, entering into marriage for the second, third, or subsequent time are most often seeking to protect their considerable home equity wealth accumulated from decades of sky-rocketing house prices, in addition to their pensions, and share portfolios.
Are Prenuptial Agreements legally binding in the UK?
Despite their popularity, Prenuptial Agreements are not technically legally enforceable. However, the Courts have shown a willingness to consider such agreements when determining the financial apportioning of wealth. The Supreme Court stated in Radmacher v Granatino:
“The Court should give effect to a nuptial agreement that is freely entered into by each party with a full appreciation of its implications unless in the circumstances prevailing it would not be fair to hold the parties to their agreement”.
Not all Prenuptial Agreements are created equal; however, and the Courts will look at the following when deciding whether to uphold pre-marriage contract:
- Was there any undue pressure and did both parties fully understand the implications of the agreement?
- Was there full and frank disclosure of each party’s financial circumstances?
- Did each party receive independent legal advice?
- Was there any material lack of disclosure of information when the agreement was drafted?
- At the time of an order being made by a Court, are there any prevailing circumstances which may make it fair or just to depart from the agreement?
The Courts will also take a dim view of any agreement which prejudices the reasonable needs of children.
Many modern couples have international interests, and these must considered in any Prenuptial Agreement. For example, if one party is habitually resident in an overseas country, and perhaps has property or other financial assets in that jurisdiction, it is important to capture and agree on how these will be handled in the event of divorce. A specialist family Solicitor will be able to advise you on the implications of international assets. As such, it may be necessary to choose the jurisdiction which will govern the agreement in the event of divorce or separation.
What is included in a Prenuptial Agreement?
Prenuptial Agreements can include any financial asset owned by a party entering into marriage, including (but not limited) to:
- the family home
- other property purchased jointly
- property inherited during the marriage
- income or assets received from trusts
- money in joint accounts
- personal belongings or possessions owned before or acquired during the marriage
- savings accumulated during the marriage
- maintenance arrangements
The Prenuptial Agreement should also state the events which will trigger a review of the agreement and whether it should be confidential. It is good practice to ensure Prenuptial Agreements are reviewed every few years as a matter of course and always in the event of a major life change such as the arrival of children.
Prenuptial Agreements, rather like Wills, exist to ensure that mutually pre-agreed financial and other arrangements are put in place in the event of a major life event. It is vital that both parties enter into Prenuptial Agreements willingly, with a full understanding of the legal and financial implications and disclose all relevant information. While no one ever wants to contemplate the ending of their relationship, if drawn up fairly and with the needs of both parties to the marriage or civil partnership considered, Prenuptial Agreements can save additional and unnecessary discord.
Please note, this article does not constitute legal advice.
Hart Reade Solicitors are a full-service law firm with offices in Eastbourne, Hailsham, Polegate and Meads. We hold a Lexcel Accreditation from the Law Society of England and Wales. To make an appointment with one of our dispute resolution Solicitors, please phone our office on 01323 727 321.