When entering into a marriage or civil partnership, people may wish to ring-fence assets they have acquired previously, in order to prevent their inclusion in a divorce settlement should the marriage fail. This may seem a pessimistic attitude to take, but with one in three marriages ending in divorce, it is understandable that people worry about losing assets they consider to be solely theirs.
A pre-nuptial agreement, or ‘pre-nup’, is a legal agreement entered into by a couple before their wedding or civil partnership ceremony takes place. The pre-nuptial agreement provides for an agreed distribution of assets if the marriage ends in divorce. They are commonly made by wealthy people, especially where the assets of the couple prior to the marriage are very unequal.
Although most of Europe now recognises the validity of pre-nuptial agreements, in theory UK law does not – the argument being that marriage is to be encouraged in the public benefit, so an agreement which presupposes divorce is contrary to the public good. When a couple separate, the divorce courts will always attempt to divide their assets in the fairest possible way. What seemed equitable at the time of signing a pre-nuptial agreement may look very different after several years of marriage, when circumstances may have changed radically. For this reason, the courts will decide what is fair based on the facts presented to them.
However, even though pre-nuptial agreements are considered to undermine the idea of marriage as a lifelong union, they are becoming increasingly popular, especially with wealthy couples. Whilst pre-nuptial agreements are in essence not binding or legally enforceable in UK law, they are beginning to have more influence as the courts increasingly accept that they are indications of a couple’s intentions at the outset of their relationship and more and more couples are signing them. Recently, the Court of Appeal, in upholding a ‘pre-nup’ signed by two financially-sophisticated persons, went so far as to set out the criteria which the courts should apply when considering the weight a pre-nuptial agreement should have in deciding the division of assets on divorce.
If you are considering drawing up a pre-nuptial agreement, it is important that both you and your partner take independent legal advice, otherwise the agreement will not normally be recognised. A pre-nuptial agreement can be disregarded if there is evidence of duress, unfairness or fraud and it is also vital that all assets are disclosed or it will be set aside.
There are, of course, pros and cons of entering into a pre-nuptial agreement. On the downside they are not very romantic: it could feel as though you are entering into marriage with a lack of trust in your partner, and it could lead to future resentment between you.
On a positive note, pre-nuptial agreements are a good way of clarifying each partner’s financial expectations before the marriage takes place. This may be of particular importance if one partner wishes to protect business or personal assets, provide for children from a previous marriage or preserve inherited wealth. In the event of a divorce, it can make matters easier and save a lot of the court’s time if the division of a couple’s assets has already been discussed and agreed upon and the court is persuaded that the agreement is truly indicative of a couple’s intentions.
It is important to remember that marriage invalidates a will and so all couples should make new wills as soon as possible after their marriage or civil partnership ceremony.