When you think of pre-nups, your mind may jump to celebrities and the super-wealthy. The reality is quite different.
Across the UK, they are becoming increasingly common as a way for couples to help effectively manage their finances. While they might seem far from romantic, they can be an important part of ensuring security and clarity for couples and their dependents in the event of a relationship breakdown, and can help make circumstances during a split that little bit easier by mitigating arguments about money.
But, by their nature, they’re often shrouded in secrecy, and not often talked about outside of households themselves.
What really are they, who uses them, how do they work, and what should they include?
What is a pre-nup, and who tends to use them?
A pre-nup is an agreement, made before marriage or a civil partnership, between a couple about what should happen to assets if they get divorced or dissolve their civil partnership.
There are also post-nuptial agreements, which can be similar to pre-nuptial agreements except their timing occurs after the marriage or civil partnership, perhaps because there wasn’t enough time to do a pre-nuptial agreement or where there is a need to protect additional assets that may be acquired during the course of a marriage or civil partnership. Sometimes people have both.
They’re used by people in a whole range of circumstances, but we often see them deployed by those entering a second marriage and who want to ensure that their children from a first marriage do not lose out on potential inheritance as a result of their new relationship breaking down; by entrepreneurs; by people with shares in a limited company; by those who may have a stake in a family business, or by those who may have received an inheritance, large or small, and who feel that that money should be considered separately to the couple’s ‘matrimonial’ assets.
Are they legally binding?
In England and Wales, strictly speaking, no.
The current law would have to change to make them legally binding.
But – and this is a big ‘but’ – the courts take them very seriously. English courts are required to take a pre-nup agreement into account when deciding if they should order one party to split assets with another in a divorce or dissolution.
People can expect to be held to a pre-nup or post-nup if it is fair and meets both parties’ financial needs, especially so if certain safeguards are adhered to.
These can be summarised as:
The agreement meets contract law criteria, such as not being made fraudulently and without undue influence;
The agreement is signed as a deed no fewer than 28 days before the wedding;
Both parties have been informed of its implications, have understood them and considered, and ideally sought, legal advice;
Both parties have fully disclosed their assets and resources
What should they include?
There is no set format to what a pre-nup should include. They are deeply personal and based on the individual couple and their specific circumstances.
Pre-nups are often used as a wealth protection strategy, to protect assets or funds which may have been built up before marriage, or have been inherited or gifted.
A pre-nup can be as detailed as the parties like, stipulating arrangements about school fees, financial support, who will keep specific pieces of furniture, or even what happens to a shared pet (which has given rise to the concept of ‘pet-nups’).
If a couple aren’t in a position to predict what they will have at the time of a hypothetical split, pre-nups can instead record principles. For example, a couple could state that assets they have acquired before the relationship should be excluded from a divorce or dissolution settlement, but that all property acquired during the marriage or civil partnership will be shared.
It’s also possible to build in reviews so that the agreement is re-considered at the date of significant life events, such as the birth of a child, and to ensure that it continues to be fair during the course of the marriage or civil partnership
Top tips on approaching the process
Although pre-nups are gaining in popularity, they can still be a contentious topic to raise with a partner.
The key things to remember are:
Be open and honest with your partner and explain your reasoning. It’s worth pointing out that all agreements will be made collaboratively. They can only be entered into if both parties agree.
Inheritances are often a point of contention in a divorce. Talk to family members who may have gifted you money or who you may be set to inherit from. Although awkward, finding out from family members what, if anything, you might inherit from them and what their wishes would be for that money can be useful in determining how important a pre-nup could be for you.
That said, postnuptial agreements can also be implemented during the course of a marriage or civil partnership, so you do have other options should your situation change.
Seek the advice of a lawyer in good time. Don’t leave it to the last minute. Family lawyers have extensive experience in working with couples going through this process and will be able to help manage the process sensitively, while also ensuring both parties get the most out of any agreement. They will also be able to help ensure that appropriate safeguards for the agreement are in place.
Keep your agreement updated, where appropriate. Your agreement should keep pace with changes in your circumstances. Regular reviews are key.
By Fiona Turner, Partner and family law expert at national law firm Weightmans
