Protecting your assets before marriage; the power of the prenup

Encouragingly, perceptions around prenuptial agreements are changing for the better and they are a good idea if you have assets that you need to protect before you get married. 

After all, you take out an endless list of insurances including car, home, life, medical, holiday, appliance and pet insurance…so why not take out marriage insurance?  It could prove to be one of the most important decisions you make. Around 1/3 of UK marriages in England and Wales end in divorce and by having a prenup in place means that nothing is left to chance when it comes to protecting yourself and your (other) loved ones in the divorce courts.

You may feel that you don’t have a significant amount of wealth that you need to ringfence right now, but that doesn’t necessary mean that a prenup agreement isn’t something that you should consider; in most cases, you’d be surprised by what you do, or could, have. Similarly, if you do have considerable assets, it is well worth drawing up a prenup to protect your current and future wealth. 

So what is a ‘prenuptial agreement’?

It’s a contract (more commonly shortened these days to ‘prenup’). You and your partner enter into this contract before you get married and it outlines ownership of assets respectively and if the marriage breaks down and you end up divorcing, it then helps the court to distribute your assets as you intended, as long as you adhere to the prenup criteria!

Here are a few things to think about to safeguard your wealth before you tie the knot:

One partner has more than the other

If there is existing disparity in wealth this is a key driver for entering into a prenup contract. If one partner is significantly wealthier than the other and the marriage fails, they stand to lose a lot more than the other if there is to be an equal split in the settlement. By having a prenup in place, you can protect wealth that has been accumulated over a period of time, long before any talk of marriage. It can also go a long way to safeguarding any expected future wealth from career success, business venture or financial growth from investments and associated future earnings. 

Are there prenup conditions which need to be met?

Yes, there are certain criteria that you need to meet before your prenup can be validated which protects both parties, and in a nutshell, here they are:

  • Each party must provide full disclosure of all assets, liabilities and any debts in the agreement.
  • The agreement must be voluntary.
  • It must be unbiased, written up correctly, signed and witnessed and, above all, must be fair. This means a qualifying prenuptial agreement cannot be used to get out of providing for a party’s needs at the point of divorce; any attempt to do so could render the agreement invalid.  

To protect your assets from a potential 50/50 split, you need to consider each one of your assets in your agreement and here are some common examples:

Your family home: Determine how the family home will be divided should you get divorced.

Money: Agree the division of money held by one person, both parties, in joint or separate accounts which includes day to day accounts, savings and investments.

Debt: Limit any debt liability should one spouse accumulate any debt.

Children: Protect your children from a previous relationship in terms of their future right to any of your property or assets.

Property: Protect any pre-existing property that either partyhas brought into the relationship. This can include second homes, holiday homes and business premises.

Inheritance/Trusts: Safeguard any assets gifted to one of the parties or inherited before the marriage, as well as any assets gained from a Trust.

Is a prenup legally binding?

Not quite, as they are not enforceable in UK law. HOWEVER, judges in the UK generally give prenups significant weight during divorce court proceedings and will usually uphold them providing the prenup has been drawn up properly, signed and all considerations have been met. By having a prenup in place you can often avoid uncertainty when it comes to a judge’s ruling.

There has been some positive movement around this by The Law Commission who, in October 2009, began examining the status and enforceability of prenuptial agreements (as well as post-nuptial agreements and separation agreements). In 2011, it published a consultation paper discussing whether all three of these agreements should be legally binding subject to certain safeguards. Further papers were published in 2012 and then the final report was published in 2014, recommending the introduction of qualifying nuptial agreements that will limit the court’s powers to make financial orders on divorce or dissolution. This means the court would be prevented from making orders inconsistent with the terms of a qualifying nuptial agreement except to meet either party’s needs or in the interests of a child of the family. So, whilst not completely legally binding, a prenup will still stand you in good stead.

Broaching the subject

Historically, broaching the subject of a prenup has caused unease in a relationship, particularly if one party wants one and the other does not. In 2021, where equality in modern day relationships plays its part, most couples see the sense and value in drawing up a prenup as a marriage insurance, especially when they already have children and assets beforehand. Married life is a wonderful and positive experience for many couples and arranging a prenup shouldn’t change this.

If you are thinking of drawing up a prenuptial agreement you must seek professional legal advice. Sheryl Perry is a prenuptial agreement expert who can offer you no-obligation 30-minute consultation, completely free of charge. Getting your prenup right to ensure its validity is crucial in protecting your assets, so contact her today and set your affairs in order and protect your future.

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