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Pre-nuptial agreements: helping to protect wealth on divorce Pre-nuptial agreements: helping to protect wealth on divorce

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Mar 24

Pre-nuptial agreements: helping to protect wealth on divorce

Written by Carmelita Ardren
Head of Family, Children and Divorce

DDI: 01423 724 639
M: 07854 312652
E: carmelita.ardren@raworths.co.uk

Raworths’ Head of Family Carmelita Ardren discusses pre-nuptial agreements as an important tool to protect wealth on divorce.

Significant family wealth rarely “just happens”. It comes from years of hard work and careful stewardship. The time for planning to move that wealth to the next generation can often come much later but, when it passes to the next generation, have you thought who else will benefit from it?

Marital Agreements are fast becoming an essential part of wealth planning. Wealth passed (or intended to be passed) through the generations bring with it huge benefits but also carries the responsibility to protect and nurture it for the future. Often we think about tax/financial planning or the nuts and bolts of family trusts, but to what extent does that planning include discussions about your children’s future? With nearly half of all marriages/partnerships ending in divorce, many years of hard work and endeavour can be lost on divorce if the implications of this have not been fully thought through.

Since a landmark case in 2010 there has been a huge increase in Marital/Partnership Agreements of all shapes and sizes some of which protect only inherited or “family assets” and some structured to cover assets accruing both before and during the marriage/civil partnership. Every case is different, from protection of a business or gifts/inheritance to family jewellery, investments and houses – even who should keep the beloved pets on a separation. In 2021 a report from the think tank, Marriage Foundation, showed that one in five married couples since 2000 had some kind of marital agreement and a properly drafted prenuptial agreement had a fundamental impact on what otherwise would have been a significant matrimonial settlement following a divorce.

What is a Marital/Civil Partnership Agreement?

This is an Agreement created for those who are about to enter into marriage/civil partnership or, indeed, they may have already tied the knot and are about to come into wealth. These Agreements address what would happen if the marriage/partnership should break down. If done well, it can be an effective solution for all involved.

It can avoid the worry about Court proceedings and minimise the financial and emotional toll on a couple if the relationship should end in a divorce/dissolution. It can set out clearly what is intended to fall into and out of the pot to be shared if divorce should happen. It is important to say that these Agreements are not enshrined statute and cannot exclude the normal  matrimonial/Civil partnership laws, but the Courts are very much minded not to interfere with the autonomy of an individual if:

  • they know what they are signing up to, have legal advice and the agreement is properly drawn
  • have appropriate financial visibility as to assets involved
  • are not under pressure/duress or subject to fraud or mistake
  • the agreement is substantially fair (meeting basic needs)

Such Agreements cannot prejudice the rights of any children and should not be unfair to one party in meeting their financial needs. “Needs” are interpreted through the prism of the standard of living the parties were able to enjoy during the marriage/partnership – but that does not necessarily mean that standard is replicated. The starting point becomes “why should you not be bound to this Agreement?”

Start the conversation early

Having the conversation early and well before a child’s partner is on the horizon prevents the difficult “you just don’t like him/her/them”. The focus is on the protection of, and responsibility for, the legacy – nothing personal. If this is normalised as a family expectation, the first time it is mentioned will not be in the same breath as “will you marry me?” – a real mood killer. This will at the same time reduce upset, miscommunication and misunderstanding from both sides.

Protection of family wealth

A Marital/Partnership Agreement is aimed at preserving and protecting non matrimonial wealth and assets and clarifying the financial rights of both spouses/partners. It should clarify the couple’s financial relationship and establish intentions regarding what they each have as they enter into their marriage/partnership and where they might expect to be if they were to exit. Periodic reviews can and, in some cases, need to be built into the Agreement. This might be where children come along or if the parties financial positions change. A review of the Agreement keeps it relevant and current and is therefore much more likely to be upheld.

The reality is that marriages/civil partnerships where there is wealth to pass on is not just between the couple themselves but inevitably involves the wider family. Having ‘the chat’ early, honestly and sensitively can help to remove a lot of the worry and emotion later and builds in a safety net. Everyone can then rest in the knowledge that in the words of Maya Angelou “Hoping for the best, prepared for the worst, and unsurprised by anything in between”.

How to contact us

To discuss this article please feel free to contact Carmelita Ardren, Head of Family at Raworths to discuss pre-nuptial agreements: email: carmelita.ardren@raworths.co.uk or phone 01423 566666

Published on 22 March 2024

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