When is the right time to consider Prenups and Postnups?
Last year a YouGov poll found 42% of British people consider prenuptial agreements to be a good idea, and between 1/4 and 1/3 of those earning over £60,000 a year are likely to put one in place, with women more likely to do so than men.
Why are Prenuptial agreements becoming more popular?
As the popularity of prenuptial and postnuptial agreements continues to grow in England and Wales, they need to be considered before or during a marriage, particularly if financial circumstances change. They are especially important to have where one person is looking to protect their wealth, whether this was acquired or generated by them or passed to them as generational wealth and/or succession planning.
What is the law?
Prenuptial agreements (“prenups”) are signed by the couple before marriage and postnuptial agreements (“postnups”) are signed after marriage. Neither are automatically binding on any judge dealing with finances on divorce, but courts should give effect to an agreement that is freely entered into by each party with a full appreciation of its implications unless it would not be fair to hold the parties to the agreement.
What is the role of Prenups and Postnups in divorce proceedings?
Without any agreement in place, every couple getting married in England and Wales is already committing themselves to having a judge decide their financial arrangements according to the law at the time of any divorce.
How do courts consider assets in divorce proceedings?
Under current divorce law in England and Wales, all resources worldwide owned by the parties are considered by a court as part of financial proceedings. This includes assets in each party’s sole name such as properties or shareholdings, inherited assets, pensions and all forms of income. As such, the court has powers to make orders to share some or all assets to meet both parties’ reasonable needs.
What are the benefits of Prenup and Postnup agreements?
The purpose of a prenup or postnup is for the couple to be able to shape their own arrangements rather than leaving it to the court. Often this will:
- support the relationship by providing clarity of each person’s intentions and so reduce tensions during marriage;
- give early advice so that the couple enter a marriage with their eyes open about its legal implications on their resources;
- enable them to make informed decisions during the marriage about financial arrangements;
It must be carefully crafted to consider what a judge would find reasonable on any breakdown of the relationship. Some agreements do not take this into account and so have been unravelled losing the protection of the assets they intended to ringfence, emphasising the importance of advice from experienced specialists like Freeths.
When to consider a prenuptial or postnuptial agreement
The following are some examples of situations for which it is worth at least getting advice from an experienced family solicitor about options including the support a prenup or postnup can give.
The advice should be taken well before marriage where possible, but otherwise at any time before an anticipated change in circumstances.
When this happens, it can change a property from being viewed as one person’s property to being a family home and so a matrimonial interest available to be shared unless protections are put in place, so family advice should sit alongside tax and property advice. A family home will also set the standard of living the court will expect both parties to have going forwards.
Parents and other family members often consider passing wealth to younger generations during their lifetime or within their wills. This succession planning has many benefits, for example from a tax perspective, but it can also bring a resource into a marriage and so allow a spouse to include the value in separation of assets on divorce. Family law advice taken in advance, including for couples living together before any marriage has been contemplated, can help to protect the wealth and form part of the overall wealth planning discussions.
Transfers of ownership between or to the couple and/or practical management arrangements can impact on whether or not the equity in any portfolio or the value of any property business falls to be shared on divorce. By working with family lawyers in the background, other property professionals involved can ensure that when decisions are made, the person is fully aware of the consequences
Pensions are often shared to achieve equal income or capital values on retirement. It is worth bearing this in mind when structuring arrangements for director’s pensions within any company.
All resources are taken into account by a family court, including business assets in whatever form they take. The way in which they are structured can make a difference to their treatment as can the involvement either spouse has had. Family advice dovetails into advice from corporate teams here.
These are often income-producing as well as assets. On top of the legal ownership, the practical day to day arrangements, as well as the parties’ perceived financial needs, can impact on its treatment by a family court. A good family lawyer will work with other legal advisers like agricultural property, trusts and estates and corporate lawyers as well as valuers, land agents and tax advisers
The country(s) in which either of the couple owns assets and/or has their home can impact on the options available at the time of any separation, so whenever someone is moving country a prenup or postnup will mean they are up to date on the impact this may have. This will involve working with advisers in the relevant countries.
Where there is an existing agreement, it will often contain a review clause in certain circumstances. If the change happens without a review then this undermines the agreement, as does any significant change generally.
How our solicitors can help you?
Our specialist lawyers are always happy to speak to any people in these situations or their advisers to make sure that they have a complete picture and understanding of the options available to them.
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The content of this page is a summary of the law in force at the date of publication and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.
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