What is a pre-nuptial agreement?
A pre-nuptial agreement is useful to protect:
- Assets acquired before the marriage;
- Inherited assets & family wealth;
- Gifted assets;
- The interests of children born to each of the parties prior to marriage.
You can also enter into a post-nuptial agreement, which can offer the same protections. However, a post-nuptial agreement is entered into after marriage, rather than before.
Advantages of a pre-nuptial Agreement
- It provides clarity as to what will happen if the marriage breaks down;
- It could reduce the cost of litigation;
- It seeks to protect pre-acquired assets of the marriage and the interests of children conceived by each of the parties prior to marriage;
- It encourages those with wealth to enter into marriage knowing that they have taken steps to secure the protection of their non-marital assets, as far as is possible.
Are pre-nuptial agreements legally binding?
To ensure that a pre-nuptial agreement is written accurately and protects the interests of both parties, it is crucial that independent legal advice is taken.
Pre and post-nuptial agreements are not legally binding. However, they can be recognised by a court. However, the family courts are increasingly respecting of the terms of an agreement where the following criteria have been met:
- Each party receives independent legal advice on the terms of the draft agreement;
- There needs to be full and frank financial disclosure by each party;
- Each party must enter into the agreement of their own free will;
- The terms of the agreement must be fair and reasonable;
- There must be enough time between signature of the agreement and the wedding ceremony, to avoid any suggestion that either party was placed under pressure at the last minute;
- The agreement must be made by way of Deed;
- The agreement is more likely to be upheld if its terms last for a specified period, such as 3-5 years, and that there is a review of terms in the event of a change of circumstances, such as the birth of a child or ill health.
Can you get a pre-nuptial agreement after you get married?
An agreement created during marriage is usually called a post-nuptial agreement. These agreements can be entered into during the marriage and can seek to protect certain assets from claims by the other spouse in the event that the marriage was to break down.
They are useful in protecting business assets, especially used in conjunction with a restructure of company shares and the creation of a discretionary trust.
Post-nuptial agreements can also be useful to set out the assets of both parties and state how these will be divided in the event of a marriage breakdown, divorce, separation or death. This can provide clarity about finances and can be especially useful for high-net-worth couples.
Can I get a pre-nuptial agreement before a civil partnership?
The same provisions apply as for married couples. Civil partners can also enter into pre or post-nuptial agreements.
Creation of a trust
The creation of a trust may protect a spouse’s family wealth to some extent from the family court. Our courts have a broad power to vary certain nuptial settlements and can take into account the existence of a trust as a “resource” of the spouse who benefits from the trust.
The trustees of a trust, whether the trust is based here or offshore, will need to take swift expert advice at an early stage to protect all the beneficiaries of the trust, and must be advised on the extent to which they must submit to the jurisdiction of the courts of England & Wales or whether the offshore jurisdiction which governs the trust provides the trustees with local protection. In the case of offshore trusts, it is important to obtain legal advice in this country and in the relevant overseas jurisdiction.
At Myerson, our Private Client and Family Law Specialists can advise spouses, settlors and trustees, (whether in this country or overseas), on their duties and responsibilities, and the extent to which the trust itself is vulnerable to attack upon divorce. The Private Client Team has extensive experience in drafting trusts to ensure that family wealth is given maximum protection, and in advising clients on the most tax efficient way to protect their wealth.