The start of a new relationship can be an exciting time but have you stopped to think about what will happen if things don’t work out as you hope. When everything is fresh and new the thought of things going wrong is far from your mind and the prospect of this happening is very easy to dismiss. Please accept that we are not trying to spoil your happiness but rather bringing some hard reality to the situation. If this is a new relationship after a previous marriage or long term relationship has ended then you will probably understand from experience that what follows is important.
What if you are planning to marry and there is inequality in your assets? What if you have been married before and wish to plan for the future or have had a successful career and already own your own home? What if you are not planning to marry but intend to live together and/or buy a home.
Making such a life changing decision without full consideration of the possible outcomes can store up problems for the future. We can help you approach those issues in a sensitive manner and advise whether a prenuptial or cohabitation agreement is right for you.
As the name suggests, a prenuptial agree is a written contract between two people who are about to marry. A cohabitation agreement is relevant to a couple intending to live together without ther being a marriage
I am getting married but why should I think about a prenuptial agreement?
- A prenuptial agreement is a contract made between prospective spouses before the marriage takes place. It can cover a whole range of things, dealing with how a property or assets should be divided in the event of divorce. Prenuptial agreements are most commonly used where there is a marked difference in wealth owned or inherited by the couple prior to the marriage. It can also be used to protect assets or property received perhaps from a first marriage. Working out difficult key issues in advance can help avoid later costly, time consuming and emotional court proceedings.
- A prenuptial agreement is one of the factors that a court will have regard to in a dispute about finances and is aimed at preventing disputes from the outset. In a case in October 2010 the court held that it would have high regard to a prenuptial agreement that was freely entered into by the parties with a full appreciation of its implications if it would be fair to hold them to their agreement.
My assets need protecting but how can I broach this subject with my fiancée?
- There is no avoiding the fact that it is a tricky thing to discuss but if it is relevant and important you may seriously regret not grasping the nettle at this stage. As you are planning to get married you need, now more than ever, to understand each other and ensure that you have the same goals and aspirations. None of us know what the future holds and a prenuptial agreement can reduce risks if things don’t work out as hoped. It is of course a delicate subject and one that should be approached with a great deal of sensitivity and understanding. However, it is better to make your feelings known in the early stages of the relationship, particularly if you have significant assets. It may be that we can help give advice that provides you with the basis for broaching the subject.
What are the disadvantages to a prenuptial agreement?
- Prenuptial agreements haven’t had a long history of being looked at favourably by the courts of England and Wales although recently this has been changing. But there is still a risk that unless great care is taken in negotiation and preparation of a prenuptial agreement the court may not uphold the whole or part of it. It is essential if you are considering entering into a prenuptial agreement that you get clear and comprehensive advice about what should not be included as, for instance, it cannot deal with child support to the exclusion of CMS (formerly the Child Support Agency). In addition prenuptial agreements can be undermined or invalidated in some circumstances:
- if there is undue influence and one party felt pressurised into signing it and felt they had no bargaining power
- it was so one sided it was unfair to uphold it
- failure to provide proper or accurate disclosure of financial affairs.
- Significant change in circumstances not provided for in the agreement so as to make the agreement unfair
So how is a prenuptial agreement different from a post nuptial agreement?
- A prenuptial agreement is signed before a marriage, but a post nuptial agreement (sometimes called an ante nuptial agreement) is signed after the marriage ceremony has taken place. In certain circumstances, particularly where the prenuptial agreement is made close to the date of the wedding, there can be a need for both pre- and post- nuptial agreements, in which case the court will have regard to both of them.
Once I have a prenuptial agreement. Is that it?
- No. Any well drafted prenuptial or post nuptial agreement should provide for review either after a lapse of time, say three to five years or there is a major change of events (ie birth of a child, significant inheritance, significant increase or decrease in assets/income). By providing for review and reviewing the agreement from time to time you give it a greater chance of being upheld in the event of a separation.
When I am living with my partner will I be protected as a ‘common law’ husband or wife?
- No, no , no. This is a myth! Despite what very many people think there is no such concept under the English law. There is no such legal status. The Law Commission recommended a change in the law back in 2007, but plans for this have been shelved with no sign of them being resurrected. Reform is still likely to be many years away if it happens at all. When a relationship breaks down between an unmarried cohabiting couple it very simply comes down to who owns what and how this can be proved if not agreed. One party may make a contribution to their household by doing work to property owned by their partner, or might give up work to look after their children but this does not provide any automatic right to any financial recognition of this and this can lead to former cohabiting partners finding themselves involved in complex litigation involving trust law. This can be avoided if the ground rules can be agreed and documented – this is a cohabitation agreement.
I am not married or engaged what protection can I get?
- One easy and relatively inexpensive solution is to have a cohabitation agreement. This is a contract between two people who live together which sets out their agreement on the division of the assets held jointly or in their respective sole names. It provides clear evidence of what is intended either upon relationship breakdown or indeed on death. It is essential to note that a cohabitation agreement is not the same as a prenuptial agreement and should not be treated as one. If you decide to marry at a later date separate consideration should be given to a prenuptial agreement. You will also need to review your agreement from time to time particularly if either of your financial circumstances change.
What can I include in a cohabitation agreement?
- A cohabitation agreement is just another form of contract. It says who it is between and that you both intend to be legally bound by it. It needs to deal with how all the major assets will be treated, what contributions each will make and how those contributions should be viewed. Other than this, the contents of the agreement will be tailored to your individual circumstances and can include what is important to you both. It is vital that each party gives discloses full details of their assets and liabilities. It is highly advisable that both parties have proper legal advice to ensure that the agreement is as effective as it should be. Also if you own or co-own property see below
What else do I need to think about now I have a cohabitation agreement?
- It is a sad fact that none of us live for ever and what will happen if your partner dies? If he/she does so without making a Will any assets he/she has will pass automatically to their next of kin under the laws of inheritance and this is unlikely to be you. Unless you are part of a small group of people who your partner has an obligstio to provide for you may be entitled to nothing. Inheritance disputes are notoriously difficult, long lasting and expensive; they should be avoid if at all possible and a key part of doing this is there being well-drafted and appropriate wills in place. The law relating married couples and civil partners on death will not apply to you and is entirely different.
- You also need to think hard about a (new) Will to reflect your wishes in the event of your death. For more information please contact our Wills Department.
- If your cohabitation agreement involves an unequal capital contribution from one partner, in particular when buying a home, then an appropriate declaration of trust should also be prepared to make sure that the technical legal issues relating to property rights are dealt with. Do not assume that they are governed by common sense! For more information please contact our Residential Property Department.
I own a house, is this covered by a prenuptial agreement?
- It is probable that your interests in property could be the most valuable assets of you and your partner (married or otherwise), and this may produce considerable disparity of the wealth between you. What happens to ownership of property on death or divorce is not necessarily logical or common sense and is quite easy for there to be undesirable results if consideration is not given to this in your forward planning. If there is a need to protect assets it is vital that you get advice about this in any event and particularly when dealing with a prenuptial or co-habitation agreement. It is very likely that a declaration of trust relating to substantial assets is required to ensure certainty and achieve what you need.
- This particularly applies if you are planning to buy a property together.