The notion of a prenup can conjur up images of wealthy spouses seeking to protect holiday homes in the Bahamas or sprawling, countryside mansions. But these types of agreements are fast becoming a popular choice, across the UK, for couples from various walks of life. In this article, family lawyers Zoe Bloom and Hilary Pennington-Mellor, along with tax and wealth management lawyer Sarah Noake, explain why prenuptial agreements can work for any couple.

What’s mine is mine

As the age of those entering into first time marriages continues to rise, it’s logical to expect many of them to have spent time amassing more, in terms of assets, on their own, which they want to shield from the prospect of divorce. Nuptial agreements form the best insurance parties can enter into, to give certainty in the event of a family breakdown. The only possible argument for them being “not relevant” is in circumstances where there is only enough money available to meet the separating parties basic needs, in terms of where they will live and how they will be supported following a divorce. Even then, when coupled with mortgage capacity and the expectation that parties move to cheaper parts of town, or perhaps rent, a prenuptial agreement will help determine the best outcome for the parties with limited court interference.

Nuptial agreements are usually entered into when times are good and there is a common intention to find an agreement which works best for both parties. That is a far better environment from which to come to an agreement which has the potential to work in the long term and be fair. Negotiating agreements after the end of a relationship, when parties are filled with animosity, distrust and bruised emotions cannot be a good time to find workable solutions for the common good.

In the courtroom

While these agreements are not legally valid, their terms need to be transposed into a consent order at the point of divorce and they always carry the risk of causing disagreements – if the court is asked to rule on the outcome, the strong likelihood is that, in the absence of vitiating circumstances, (e.g. one party was forced to sign or they did not have the opportunity to seek legal advice) then the court will do its best to stick to the terms of the agreement. It will usually come away from the terms only if they are very unfair or unworkable and even then, will often stick as closely to the agreement as it can. Many judges take the view that if there was an agreement and one party acted in a particular way because they thought there was an agreement that agreement should hold, if possible.

Zoë Bloom says “I was recently in court with a client who told me she had approached a solicitor to ask whether she should enter a nuptial agreement to ring fence her £134,000 contribution to the purchase price of the family home and was told not to bother. I am told that she was advised that, in circumstances like hers, it was a pointless exercise and the court would override the agreement in the interests of achieving fairness between her and her ex-husband. Apparently, that solicitor had equated fairness with equality and determined that the court would simply divide the property in half regardless of any agreements which had been entered into. Thus far, the client had spent £20,000 trying to secure her contribution of £134,000. In the alternative, a nuptial agreement would have cost £3-5,000 + VAT for advice for both parties and would have hopefully saved the £20,000 court costs. I am increasingly arranging to meet parties together with the other legal advisor to thrash out an agreement in a morning. Everyone leaves the meeting with a full copy of a signed and agreed nuptial agreement. This saves hours of time in sending copies between legal advisors, amending drafts and negotiating terms. It gives the parties a far better sense of control over the process and input into their wishes and avoids everything being dragged out which can lead to disagreements.”

Consider the circumstances

Hilary Pennington Mellor adds “All those contemplating marriage will be wise to consider the financial consequences of marriage and of marital breakdown. Think of the consequences to others where there is a family business, partnership or shareholding, where there are existing dependents, if one party introduces significant assets, or if there is inherited wealth, or significant disparity of asset base. If one intended spouse has assets or resources overseas (for example United States) both may need advice on otherwise unforeseen taxation consequences of property ownership and worldwide income. Also consider jurisdictional points, and laws regulating marriage divorce and child rearing in another country. There is still no absolutely watertight route to limit or define the assets receivable by one party to marriage on separation following marital breakdown. Judges are increasingly willing to grant a degree of autonomy to separating couples to allow them to decide how they will divide assets on divorce, but the court retains power to make an order which does not reflect the parties agreementin its entirety. But the court will have regard to a properly made pre-marital agreement and it is likely to be influential although not enforceable. ‘

How do prenups work overseas?

“Pre-nuptial agreements are often part of an estate plan (Wills, documents covering loss of capacity, setting up trusts) that clients undertake, particularly in civil code countries or America, says Sarah Noake.

“It can be a challenge for clients, who become UK residents, as they may not realise that the English courts take a different view of pre-nuptial agreements than their home country. It is important for couples who have moved to the UK from abroad, and end up divorcing in the UK to take advice to try and ensure that the settlement they receive is dealt with as tax efficiently as possible, particularly if they remain UK resident. For example, they may wish to seek advice on their existing planning arrangements, which most likely would need updating, as well as seeking advice on the tax efficiency of their arrangements.”

Prenups may form part of an estate plan but it’s important to remember that they are not a substitute for one. They cannot be used as an alternative for a will and, even if a couple has entered into a prenuptial agreement, each partner should ensure that they still invest in a legally binding will in order to protect their personal wealth.

Choosing to take out a prenuptial agreement doesn’t need to be costly in both time and money. With the right guidance, it can serve as an all-important sense of financial security, for all parties involved.

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This article is for general information purposes only and does not constitute legal or professional advice. It should not be used as a substitute for legal advice relating to your particular circumstances. Please note that the law may have changed since the date of this article.