Manchester 0161 832 2500 | London City 0204 505 8080 | London Finchley 020 8349 0321
Nearly half of married couples who divorce end up separating and divorcing often resulting in unpredictable outcomes.
A prenuptial agreement is a practical and flexible legal document in which couples outline their intentions as to how their assets will be divided if they decide to separate and divorce. This is known as a pre-registration document if made for those entering a civil partnership.
You can also expect to have included in a prenuptial agreement, details of how assets are to be held and managed during the marriage, such as joint bank accounts and the future ownership of property.
Prenuptial agreements provide certainty on separation by clarifying and defining potential issues; and may avoid costly and lengthy contested disputes that could otherwise occur about what happens to the finances on divorce.
A prenuptial agreement sets out who is responsible for the finances during the marriage and to whom their wealth belongs following a divorce. This agreement is more likely to be used when one individual has or is more likely to acquire more assets than the other. The purpose of a prenuptial agreement is often to protect an individual who has generated or inherited significant wealth before their marriage.
The terms of the agreement may therefore protect assets owned before the marriage; inheritance that is expected to be received in the future; trust funds and assets that individuals may wish to leave to children from a previous relationship.
Prenuptial agreements can be used to protect against being liable for the other’s debts or for ensuring the continued overall control of business ownership in one spouse’s name only. They may be used to limit any maintenance provision that would otherwise be made to the other spouse; and protect assets and income that accumulate for an individual during their career.
Although prenuptial agreements are not legally binding in England and Wales, they are likely to be upheld if the couple have entered one freely, have had independent legal advice, and have made financial disclosure of their assets and liabilities. Prenuptial agreements are becoming more popular, and the Courts are placing increasing weight on them as being reliable enough to uphold them as being fair.
Family law solicitors recommend that their clients ensure they sign a prenuptial agreement at least 28 days before the wedding. Post nuptial agreements can also be entered into after the marriage to confirm an intention to be bound by prenuptial agreements made a short time before the wedding.
If you don’t want a prenup, the outcome will be decided at the discretion of the courts often meaning unpredictable outcomes. Those marrying later in life or for a second time are particularly susceptible to losing their pension on their divorce, which would otherwise be protected by a prenup.
The outcome of the finances on divorce is guided by a checklist of factors including the financial resources of the couple; their financial needs; the length of their marriage; and their financial and non-financial contributions.
The courts also apply a number of principles including the principle of non-discrimination which means that there should be equal recognition of women who have looked after children as full time mothers; and maintained the home – as opposed to the main wage earner, normally, men, who have earned the bulk of the money earned during the marriage.
There are also several strands of fairness that are considered, including most relevantly sharing and needs. The parameters of a court’s discretion are much wider when there is no prenup in place, and needs are much more generously interpreted in comparison to the way they are assessed if there is a prenup. Prenups are therefore likely to mean that needs will only be assessed as requiring further financial support for the less wealthy spouse to ensure they are not left in a predicament of real need.
A post nuptial agreement can be made after the wedding and will then be legally binding in the same way as a prenuptial agreement. While the couple remain unmarried, intentions as to property ownership can be expressly defined in writing through a declaration of trust that can be entered into at any time but most often when the property is purchased.
Couples who are married can also enter into a cohabitation agreement to regulate their finances during their relationship and how they want to deal with their finances when the relationship ends.
However, declarations of trust and cohabitation agreements are not binding when the couple marry and should not be relied upon in the event of divorce.
It is always recommended that nuptial agreements are entered into to protect assets and income before or following marriage if the couple want to confirm their intentions as to how their assets will be divided on separation and divorce.
Estate planning and Wills are always recommended to protect an individual’s position on death regardless of the formal state of any relationship in which they are involved.