Pre-nuptial agreements (known also as pre-marital agreements) were once considered by many to only be the preserve of the rich and famous. Times have changed and they are becoming more and more popular for ordinary couples and now form a key part of financial planning. For years these types of agreements were given very little weight in decisions made by judges in the Family courts but their position has changed hugely over the last few years and they are now more and more influential on court decisions, even for couples with modest wealth, if done correctly.
What is a pre-nuptial agreement?
A pre-nuptial agreement is a written agreement between a couple made before their marriage that specifies what would happen if their relationship breaks down. People in a wide range of circumstances would benefit from a pre-nuptial agreement such as those who have built up some wealth prior to their marriage, those with children from a previous marriage, or business owners.
In a divorce situation judges in the family courts have very wide discretion to divide up a family’s assets according to what the judge thinks is fair. The starting point in UK family law is for there to be an equal division of all the matrimonial assets between husband and wife. A pre-nup is a written agreement between a couple before their marriage designed to specify or regulate what would happen with their wealth should the marriage break down and so influencing what discretion the judge can use when determining the division of the assets. Pre-nups are commonly used therefore to limit claims to far less than half the assets, or to “ring fence “specific assets or even to limit the amount and length of maintenance.
How effective are they?
As a result of a large number of court cases over the last few years the family courts are now heavily influenced by pre-nuptial agreements as long as they are entered into correctly. This means that the pre-nup must be entered into freely by both parties. To ensure that one of the couple can’t argue at a later stage that he or she was pressured into signing the agreement at the eleventh hour it is recommended that the agreements are signed at least a month before the date of the wedding. Both parties must also fully appreciate the implications of entering into it and it is very much recommended that they each receive independent legal advice from specialist family lawyers. The terms of the agreement should not be hugely unfair to one party, for example, by not meeting their basic financial needs in the event of a Divorce.
As the law currently stands prenups are not completely binding on the family court. A Law Commission report has recently recommended changes to the law to make them so. However, if considering a pre-nup agreement now, as long as the above steps are taken, then the agreement ought to be very influential in court should the marriage break down.
Who might benefit from a pre-nup?
They should be considered by those who have been married before who want to make sure that the wealth generated during that relationship passes to any children from it. They should also be considered by parents who want to ensure that any lifetime gifts or inheritances stay within the family. They would also benefit business owners who want to make sure that the future of the business is not jeopardised in the event of a Divorce.
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This Fact Sheet is for information only and is not intended to be a substitute for legal advice.