Prenuptial agreements – just for the rich and famous?
Whilst the idea of a prenuptial agreement sounds very Hollywood, you needn’t be protecting a holiday home in the Alps or a yacht parked in your private marina to be able to benefit from the protection one could provide. In fact, prenuptial agreements are becoming much more popular in the UK - for couples of all backgrounds. As the average age of first time marriages also continues to increase, we’re finding that people tend to have accumulated more personal assets of their own before they get married, which they don’t want to risk losing if they end up getting divorced.
In February 2014 the Law Commission, the body who advises the government on updates to the law, published a report making recommendations about how couples can deal with their finances if they divorce. The report is the final product of a consultation regarding prenuptial agreements (referred to as Marital Property Agreements) which commenced in 2011.
Angela Lally, solicitor and Head of Family Law at QualitySolicitors SSB explains what the recommendations mean and how a prenuptial agreement could form an important part of your overall pre-wedding plans.
What do the recommendations mean?
The “Matrimonial Property, Needs and Agreements” report proposes that there should be a change to the law to introduce “qualifying nuptial agreements”. These enforceable contracts would enable couples to make binding arrangements about the financial implications of divorce or dissolution. They would be subject to requirements as to their formation including the need for independent legal advice and financial disclosure. However, it would also be a requirement that the parties’ financial needs are met.
The Law Commission suggests that the qualifying nuptial agreements could be particularly helpful in two situations. Firstly, for couples who are wealthy (possibly also for the protection of inheritance). Secondly for couples who have been married before and have children from a previous marriage who they want to provide for financially.
Any proposed change will of course have to be approved by Parliament, so whether this change does actually come into effect, and when, is something to keep an eye on in the future. Prenuptial agreements are not currently legally enforceable (in contrast with many other countries). However following the high profile case of Radmacher in 2010 the court has been taking prenuptial agreements into account more often - this case went further than before in recognising their significance.
It is predicted that a change in the law would result in a rise in the number of couples seeking a prenuptial agreement. The advantage of entering into such an agreement is to potentially reduce the number of cases that result in bitter and expensive court room battles. As previously mentioned, it’s not all about yachts and holiday homes!
So what is a prenuptial agreement?
A prenuptial agreement (or a prenup for short) is a formal agreement, which can be drawn up for you and your partner. It sets out how you will divide your assets if you decide to divorce in the future.
How could a prenup help you?
If you already have wealth, property, savings or inheritance, a prenuptial agreement could help provide an extra level of reassurance before entering into a new marriage. It may also be helpful if you’ve been married before and want to ensure any assets you’ve built up over the years are safeguarded for any existing children’s inheritance.
Any asset, no matter how big or small, can be included in your prenuptial agreement. So, that could be savings, property, income and even pensions, all of which could be split if you get divorced. Only financial matters can be dealt within the agreement; it can’t be used to make arrangements for any children.
Things you should be aware of
When considering the advantages and disadvantages of whether a prenup is right for you and your circumstances, a key consideration should be that, whilst they are enforceable in many countries in the EU, they are not currently in the UK. However, this doesn’t mean it won’t be in the near future, or that it’s pointless getting one. Whilst your prenup will provide a guide to how the assets should be split, your case will depend on its own facts, and quite often what has happened during your marriage, for how much weight the details of the agreement will hold. In a divorce, if you have a properly drawn prenuptial agreement in place, the court will still, more often than not, take it into consideration when deciding how your marital assets should be divided.
For a prenuptial agreement to be properly drafted, both you and your partner will need to have independent legal advice and have entered into it of your own free will. To avoid any suggestion that either of you were bullied into it, it should really be signed no later than 28 days before your wedding. The closer to the wedding day, it could be seen that the more under pressure you may have felt. If it’s getting too close to the marriage date, you could consider a post nuptial agreement (after the wedding) instead.
The costs involved
The cost of getting a prenuptial agreement correctly drafted by a solicitor is often relatively low compared to potential benefits to be gained following a separation. Your partner will need separate, independent legal advice regarding the terms proposed. There would be legal costs associated with this, but it should be less than the costs involved for the actual preparation of the agreement.
Whilst some people consider prenuptial agreements to be just for the super-wealthy, unromantic and an admission that the marriage is doomed to fail, others see them as an important part of them protecting their own and their family’s assets. If a prenup is something you’re considering, you should talk to a solicitor about your situation and options.
If you want more guidance on whether a prenuptial agreement could be right for you, this video offers some advice.
If you have any questions please talk to us. Find your local QualitySolicitors firm here.