If you are engaged and have assets you independently own, you may have concerns as to what happens to these assets if your marriage fails. If you have spent many years investing in a property, or you acquired it as an inheritance, you will naturally want to understand if you can safeguard this asset in the case of divorce.
You can help safeguard these personal assets by preparing a prenuptial agreement (also known as a prenup). It is a formal, written agreement between two people prior to marriage and sets out details of all their belongings and liabilities.
For some this may seem an unromantic part of planning a marriage, but for others it creates a sense of security. Dealing with these matters at the outset of a marriage can also strengthen a relationship and support good communication within the marriage.
How will a prenuptial agreement help to protect my property?
A prenuptial explains how the couple’s assets will be divided in the event of the breakdown of their marriage. As part of the agreement, you can make it clear to one another that certain property belongs to you alone and will not be shared during the marriage or on any future divorce.
Such property is often referred to by family lawyers as ‘non-matrimonial property’. The definition of non-matrimonial property is unclear in case law, but it can be clearly defined in the prenuptial agreement so you are aware of the extent of each other’s non-matrimonial property and the value of any property you are giving up the rights to share.
You can also protect assets you may wish to ‘ringfence’ from one another, such as inherited assets, an interest in a family business, gifts received from a third party, or property acquired before the marriage. If the prenuptial agreement ringfences such property, the court is less likely to award a share of that property to the other party on any future divorce.
What other benefits does a prenuptial agreement have?
As well as defining that certain property belongs to you, a prenuptial can offer further protection and benefits at the start of a marriage including:
- Certainty. You agree at the outset of your marriage how your finances will be divided if you later separate or divorce.
- Transparency. You provide financial disclosure of your assets and income in the prenuptial agreement, so you will both know at the outset of the marriage the value of each other’s assets, which will assist you in your negotiations.
- May save money. While you will incur legal fees for preparing and advising on the terms of the prenuptial agreement, it is usually much less expensive to negotiate and draft a prenuptial agreement than to litigate about the division of your finances should you later separate or divorce.
- Compensation for loss of career. You can agree that if, during the marriage, you give up a potentially lucrative career to care for the family, you should be entitled to a greater share of the assets on the breakdown of the marriage to reflect their loss of earning power going forward.
- Protection of family members. If you have children from a previous relationship, a prenuptial agreement can protect the financial interests of those children
- Minimise acrimony on divorce. Setting out how assets are to be divided on divorce in the prenuptial agreement should lead to fewer arguments about finances should you later divorce and result in a more amicable relationship between you.
- Protection of business partners. If you have an interest in a family or a small private business, a prenuptial agreement can protect that interest and prevent disruption to the business if the marriage breaks down in the future.
- Provision on death. A prenuptial agreement can set out what should happen to your assets on your death. This can support the provision contained in your will and clarify what should happen to certain assets.
- Freedom to agree your own terms. A prenuptial agreement provides you with the freedom to agree your own terms without the court imposing a solution on you.
How do I ensure a prenuptial agreement will be upheld in court?
To determine whether a prepared prenuptial agreement is fair and should be upheld, the court will take into consideration whether both parties properly understand the agreement and were given enough time to review it before signing. The agreement must be freely entered into with a full appreciation of its implications.
Therefore, when preparing a prenuptial agreement, you should ensure that:
- It is drawn up by a qualified solicitor.
- Both parties have separate solicitors to avoid any claim of conflict of interest.
- All assets are fully disclosed by both parties.
- Both parties fully understand the agreement and voluntarily agree to it.
- Both solicitors should confirm it was entered into freely and knowingly.
- The prenuptial agreement is signed at least 21 days before the marriage.
What if we decide not to get married but simply to live together?
Very different and quite complex rules apply to couples who live together. The court will look at the common intention of the parties regarding the assets of the parties within the relationship. If there is nothing in writing or no clear evidence of discussions or promises made on the subject, the court will consider the prevailing circumstances and see if an agreement can be implied.
It is possible to put together a ‘living together’ agreement to work in a similar way to a prenuptial agreement, however, the law relating to unmarried separating couples is very different to that for divorcing couples.
Preparing prenuptials that include preowned property is a complicated area of family law, in particular, if the property is an investment property, or may be intended to become the marital home. For further advice on this or any other divorce law matter, call David on 01706 225621 or email him at email@example.com