We live in an age of high divorce rates where prenups are becoming more commonly created by two people before marriage. But what is a prenup, and what are the benefits of you getting one done?
What is a Prenup?
A prenup or ‘prenuptial agreement’ is a legally bound agreement made between two people before they get married. A prenup typically lists all existing premarital property (including debts). It specifies how this property is to be divided if the marriage were to fail.
Who Should get One?
The assumption that only very wealthy people need a prenuptial agreement to protect their assets is false. Although it may be common for wealthy people to get a prenup, other people also need to get a prenup for a range of reasons.
As divorce numbers continue to rise, more and more couples are seeing sense in drafting prenups. This is especially true of professionals who derive an income from a portfolio of works, like artists, musicians, or even journalists. Prenups can ensure in the event of a divorce, that any royalties are solely passed to the creator and not their partner.
Some of the common reasons include:
- You have substantial wealth and assets that you wish to protect
- You run a business and want to ensure its future is protected
- You have children from a previous relationship and want to ring-fence assets for them
- You are marrying someone from abroad and want to be protected from financial awards made in another legal jurisdiction
Of course, there are many other reasons why people will wish to have a prenuptial agreement. However, if you are unsure whether a prenuptial agreement is the right move for you, please don’t hesitate to contact one of our solicitors on 01273 726951 or email us on email@example.com. Our solicitors will guide you through the prenuptial agreement procedure and highlight whether it would be in your best interest do get one.
What are the Pros and Cons of a Prenup?
The truth is that marriages are becoming a more concerning move for couples than ever before due to the 42% of marriages ending in divorce in England and Wales. Although it’s nice to think that you will never fall into that 42%, not planning comes at your own risk. As a result, prenuptial agreements have become more popular than ever as couples nowadays are covering their backs. But when deciding whether you want to get a prenuptial agreement, you must keep in mind both the pros and cons before you make any decision.
Pros of a Prenup
- Protect the inheritance rights of children and grandchildren from a previous marriage.
- Protect your business or practice, so it’s not divided and subject to the control or involvement of your former spouse upon divorce.
- Protect a debt-free spouse from having to assume the debt obligations of the other.
- Ensure that you get compensation for a lucrative career sacrifice if the marriage does not last.
- Address more than the financial aspects of marriage and can cover any of the details of decision-making and responsibility sharing to which the parties agree in advance.
- Can limit the amount of spousal support that one spouse will have to pay the other upon divorce.
- Will protect the financial interests of older persons, persons who are entering into second or subsequent marriages, and persons with substantial wealth.
- Help alleviate arguments during a divorce.
Cons of a Prenup
- May require you to give up your right to inherit from your spouse’s estate when he or she dies.
- Suppose you contribute to the continuing success and growth of your spouse’s business. In that case, you may not be entitled to claim a share of the increase in value if you agree otherwise in a prenup.
- Starting a marriage with a contract that outlines the details of what will happen upon death or divorce can cause a sense of lack of trust.
- It can be difficult to project into the future about how issues should be handled. What may seem like a small compromise in the romantic premarital period may become a problem later.
- A less affluent spouse may not be able to sustain the lifestyle to which he or she has become accustomed during the marriage if the agreement limits the amount of spousal support.
- In the “honeymoon” stage of a relationship, one spouse may agree to terms that are not in his or her best interests.
Are Prenups Legally Binding?
The short answer is, no, but they can carry legal weight. In an event where there are disagreements over money and property, and there is a need for a financial settlement for divorce in court, the judge will take the prenuptial agreement into account. In this case, the judge will consider factors of the deal, such as:
- Did both partners enter the agreement understanding the implications of the agreement?
- Did both parties sign the agreement willingly?
- Was there full disclosure of assets and liabilities from both parties? (the disclosure requirement)
- Is the agreement contractually valid? (the validity requirement)
- Was the agreement executed as a deed? (the formation requirement)
- Was the agreement made within 28 days immediately before the wedding or civil ceremony? (the time requirement)
- Did both parties get legal advice? (the advice requirement)
- Are the terms of the agreement fair to both parties?
But what constitutes as being ‘fair’ when it comes to divorce financial settlements? Judges, in the UK, consider something called the ‘holy trinity of fairness’, which is made up of:
As it says on the tin, this considers what each person needs to maintain a reasonable standard of living depending for them and any children.
This considers whether one partner gave up a career in favour of building a family or looking after children, while the other did not.
This is what the marriage between the two individuals yielded, which needs to be shared (but not necessarily equally)
Suppose a prenup deals with assets and income applying the three principles. In that case, it is highly likely that the court will uphold the agreement.
Usually, if neither side would be left in abject poverty and had taken sound legal advice before signing the prenuptial agreement, the contents would stand.
Contents of the Agreement
A prenuptial agreement must set out which party owns or will own the assets on a future breakdown of the marriage. The agreement defines:
- “matrimonial property” and
- “non-matrimonial property” or
- “joint property” and
- “separate property”.
Matrimonial property (or joint property) includes assets during the marriage and assets in joint names, such as the family home and joint bank accounts.
Non-matrimonial property (or separate property) usually includes:
- Assets owned before the marriage.
- Inherited assets.
- Gifts received by one party during the marriage.
Prenups deal with income, like earnings and future earnings, as well as interests under any trusts. Nuptial agreements can deal with provision for children, but do not usually deal with financial provision for any future children. When there is a significant change in circumstances during the marriage, like the birth of children, these are handled by review of the terms of the agreement. Inserting a review clause into the prenup sets out when a review should take place. Prenuptial agreements do not usually include non-financial arrangements relating to children.
Is It Possible to Get a Prenup After I’m Married?
Yes. Although it’s not called a prenuptial agreement. After you are married, you can get a contract called a ‘postnuptial agreement’ if you and your partner are willing to do so. A postnuptial agreement or ‘postnup’ is essentially the same thing, but it’s made after marriage. There is a subtle but essential difference between the two. The easiest way to remember it is that prenups governs everything before marriage, and postnups deals with everything during the marriage in the event of the marriage failing.
How do I get a Prenuptial Agreement?
- If you have decided to marry, don’t wait till the last minute, make it a priority in your wedding plans. An agreement signed on the way to your stag or hen party is less likely to be upheld than one carefully thought out and signed a month or so before.
- Both parties must take independent legal advice. This avoids accusations, further down the line if things go wrong. Additionally, for the party with the most to lose, it ensures they understand the implications of the agreement they are about to sign.
- Think carefully about the terms and make the agreement clear, detailed and legally sound. Involvement from a solicitor will make sure a court is much less likely to question the validity of the deal.
- Think about and decide upon how you would deal with changes in circumstance that may arise during the marriage. For example, if you are thinking of having children, loss of employment, inheritances, pension provision, and the acquisition of other assets and what would happen in these instances.
- Also, consider putting in reviews of the agreement at agreed periods during the marriage. Long marriages can have a bearing on whether the agreement remains enforceable, and regular inspections of the provision can help with this.
Why Contact Our Family Solicitors?
Your prenup must be handled by one of our award-winning solicitors to ensure the economic divide is fair and runs smoothly. If you would like to speak to one of our Solicitors, please don’t hesitate to call us on 01273 726951 or send us an email on firstname.lastname@example.org.