Prenuptial agreements, often referred to as ‘prenups’, are legal documents that a couple signs before they get married or enter into a civil partnership. These agreements set out the ownership of the couple’s income, property and assets, and how these will be divided in the event of a divorce or dissolution.
There are several benefits to making a prenuptial agreement, as JMW explores in the following guide. We also explain what you should consider when deciding whether to proceed with a prenuptial agreement, and what the process of creating one involves.
Why Consider a Prenuptial Agreement?
Prenuptial agreements can, amongst other things, help to protect an individual’s property, set out out which assets are considered ‘non-matromonial’ (meaning they have been acquired prior to marriage), and dictate how inheritance should be treated if it is received during the marriage.
In the event of a divorce, a prenuptial agreement can determine how the financially-weaker party’s need for housing and income will be met, reduce conflict over assets, and help to make a potentially painful and complicated process more straightforward.
Common Misconceptions About Prenuptial Agreements
Contrary to popular belief, prenuptial agreements are not just for wealthy couples. Individuals of any income bracket may find them beneficial, especially in protecting personal or business assets. Entering a prenuptial agreement does not necessarily suggest an expectation of divorce – it can be viewed as a step towards financial clarity and protection.
Another misconception is that prenuptial agreements can dictate the terms of a financial settlement during a divorce. In fact, the Family Court retains the final authority and it will reject any terms of a prenup that it considers to be unfair or unjust.
The Legalities of Prenuptial Agreements in the UK
Prenuptial agreements are not legally binding in England and Wales, however, the family court can attach significant weight to prenups, and it is for the party who seeks to depart from the terms of the agreement to persuade the court why the terms should not be upheld.
A properly drafted prenuptial agreement is likely to be upheld by the court depending on the circumstances surrounding it.
Essential Components of a Prenuptial Agreement
A comprehensive prenuptial agreement generally includes:
- A breakdown of each party’s assets and liabilities.
- Details as to which assets are non-matrimonial.
- Information as to how the parties intend for the assets to be divided upon separation.
- Details as to what property will be made available for each party.
- Confirmation as to whether either party will receive maintenance payments and if so for how much and for how long.
A good pre-nuptial agreement will also contain a review clause that may be triggered by a number of events. For example, a review of the pre-nuptial agreement may take place once the parties have been married for 10 years or if the parties have a child/children.
Financial provisions for children may also be covered within the prenuptial agreement. However, the contact arrangements for the children are best reserved for discussion between the parties when the reality of the separation is known and a decision can be made that is in the best interests of the child.
How to Approach a Prenuptial Agreement
Initiating a conversation about a prenuptial agreement can be challenging. It requires open and honest communication about finances, which can sometimes be a sensitive subject. A strong prenuptial agreement will reflect a balance of interests, ensuring fairness for both parties. As with any legal process, an expert divorce solicitor will be able to help you understand the process and avoid any mistakes that could prove costly or time-consuming.
The Process of Creating a Prenuptial Agreement
The first step towards creating a prenuptial agreement involves a mutual discussion between the couple about their finances. Following this, solicitors for each party can provide independent advice and draft the agreement. Once the draft is prepared, it can be reviewed and revised. When both parties agree to the terms, they sign the prenuptial agreement.
In deciding whether a prenuptial agreement is valid and should be upheld, the Family Court will assess various aspects of it, including:
- Whether each party had adequate independent legal advice before entering into the agreement.
- Whether both parties’ understand the implications of the agreement.
- Whether either party was pressured into making the agreement and whether there was sufficient time to consider the agreement before the wedding.
- Whether the parties exchanged financial disclosure and whether the parties were open and honest about their respective resources.
- Each party’s needs and whether the agreement meets them
- The needs of any children of the family.
If the court finds issues with any of the above points, the agreement may be rejected and the court may make a decision as to how the parties assets are divided.
What About Postnuptial Agreements?
Postnuptial agreements are similar to prenuptial agreements, except they are entered into after the marriage or civil partnership has taken place. Couples may opt for a postnuptial agreement for a variety of reasons, such as changes in the couple’s financial situation after marriage, such as receiving an inheritance, starting a business, or substantial career advancement. Alternatively, couples may choose to enter into a postnuptial agreement as part of an attempt at reconciliation following marital difficulties.
The process for creating a postnuptial agreement is similar to that of a prenuptial agreement. Both types of agreements require full disclosure of assets, fairness to both parties, and independent legal advice to be considered valid.
Keep Your Finances and Property Secured
Prenuptial agreements offer couples a mechanism for financial protection and certainty. Though they may seem unromantic, their potential benefits are substantial. It is important for couples to have an open dialogue about their finances, and when handled properly, a prenuptial agreement can provide peace of mind and contribute towards a healthy, secure relationship.
About Elspeth Kinder
Elspeth joined JMW Solicitors in May 2018 as a Partner and Joint Head of the Family Team. Elspeth is recognised as a leader in her field by the legal directories Legal 500 and Chambers and Partners for her experience in all aspects of the law relating to personal relationships:
- Separation and divorce;
- Financial settlement following the breakdown of a relationship;
- Arrangements for children following relationship breakdown including with regard to where a child should live and how much time they should spend with each parent as well as specific issues such as place of education and funding of school fees, choice of name and welfare of a child; and
- Wealth protection by way of pre-nuptial agreements, post-nuptial agreements and cohabitation agreements.