Why you should review your prenuptial agreement

If you and your spouse have a prenuptial (prenup) or postnuptial agreement, will it stand the test of time and protect you both if the worst happens? What can be done to ensure that it does?

Properly drafted and considered prenup and postnuptial (or ‘nuptial’ agreements) can be a valuable tool in reducing conflict, expense and distress in financial proceedings on divorce. They may be challenging. There is a level of candour required, not only about existing and future financial resources, but also expectations and the degree to which it is expected that wealth will be shared. It can be, for example, quite a shock to find that your loved one does not expect to divide their assets in the way you had assumed; equally, that your partner does not anticipate contributing in the way you had envisaged.

An agreement setting out a framework for financial settlement, should the worst happen, can ensure that children of previous relationships, pre-owned assets, businesses and inheritances are protected, and that both parties understand the extent of financial provision to be provided should the marriage end.

Many parties to nuptial agreements put them away with a sigh of relief, in the hope that they will never be needed. Remember, however, that each nuptial agreement is specifically tailored to a couple’s circumstances as they are currently and, as far as possible, to how they are envisaged to be in the future. We all know that circumstances as well as people change over time and there are good reasons to review a nuptial agreement.

When reviewing your prenup, consider:

• Does the agreement still accurately reflect the original intentions? Are you both still agreed on your respective understanding of those intentions?
• Does it need updating to reflect any changes? Have any assets changed? Have new properties been purchased or has there been a change in the way property is owned? Have there been any refurbishments? A change in income levels? An unexpected windfall?
• Are each other’s circumstances the same? Has there been any change of employment status? Any health issues? Has the arrival of children led to any changes?
• Are you both content that your needs are met in the event of a divorce? Is the agreement still fair?
• Has there been any change in statute that should be reflected in a further document?

To avoid future conflicts: simply reviewing the nuptial agreement can identify potential issues or ambiguities that may lead to disputes in the future.

It is usual and sensible for nuptial agreements to contain a review. Just as the contemplation of the original nuptial agreement can be daunting, reviews can also be taxing but both ultimately protect respective financial positions.

Like any agreement, a review is voluntary and a prenup will continue as drafted if there is no review. Unless there has been a change in circumstances, assets or income that renders the agreement ineffective, there should be no problem with leaving the agreement as it is. Bear in mind, though, that equally, the passage of time can have an effect. A review every five years (or for others, more frequently, say, when a new property purchase is contemplated or if one of you is funding a substantial refurbishment) is sensible.

A well-drafted agreement will provide protection but as crystal-ball gazing is hazardous, reviewing the well-drafted agreement is just as important as the initial version itself.

If you have questions or concerns about your prenup, please contact Isobel Mundy.