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BLOG: A guide to pre-nuptial agreements

Kit Klarenberg
Written By:
Kit Klarenberg

When you’re excited to be getting married, contemplating a potential divorce – and drawing up a pre-nuptial agreement to protect your assets if that happens – is probably the last thing on your mind. You may also not believe that pre-nups working, following some negative stories about them in the press.

For example, German heiress Katrin Radmacher found the pre-nup she and her husband had signed in Germany might not be valid in England, because after they were married her husband had quit his job as a highly paid investment banker to follow his dreams, and so needed much more financial support.

But don’t let these scare stories put you off. More and more ordinary couples – or at least, those couples where one party is not significantly richer or more famous than the other – are now drawing up pre-nup arrangements.  The content of such an agreement can vary, but often includes areas like division of property or safeguarding assets that were built up by an individual before the marriage, such as a property or a business.

A word of warning however; a pre-nup will only be upheld on divorce if the judge believes it is fair.  Recent cases indicate that the courts will look at the circumstances leading up to the agreement and will be much more respectful of them when both parties have had the benefit of legal advice.

Collaborative pre-nups

A pre-nup offers greater security if it is drawn up as part of a ‘collaborative process’. This involves both halves of the couple instructing their own lawyers and sitting down at a table with a blank sheet of paper to discuss what assets they’re bringing to the marriage and how the marriage might evolve. You can bring other professionals into the collaborative process, such as financial advisors or even therapists.

A judge will take a collaborative pre-nup very seriously when considering a divorce settlement, because if a couple has undergone the collaborative process it’s almost impossible for one party to later argue that they didn’t know what they were signing.

This is important, as in the past, many pre-nups have been thrown out because the judge ruled one party had been presented with a document under duress or at short notice.

A rather sensitive subject

When couples are blinded by love, exhausted by wedding planning and conscious of the looming ceremony, broaching the subject of a pre-nuptial agreement can be very difficult. However, in some parts of the US asking for a pre-nup is now a standard form of financial planning, like making a will. There’s no reason to be embarrassed about raising the issue. It doesn’t mean you’re not committed to the marriage, it just means you’re being financially sensible.

If you use a collaborative process, drafting a pre-nup forces you to consider issues such as whether you want children or how you would feel if your partner became sick, injured and unable to work. It can even turn into a form of pre-marital counselling, which some people find very helpful.

In a wider multicultural and multinational community, pre-nups have a special place. It is particularly so in the Asian community where dowry and jewellery may form an important part of the pre-nuptial assets often gifted by family.

What criteria needs to be covered?

There has to be full financial disclosure and both parties should have separate legal advice. It is important to think about what will happen to assets in existence at the time of the marriage, those acquired during the marriage and what happens to gifts or inheritances.  It is also useful to think about responsibility for debts and other liabilities. A change in circumstances such as the birth of a child needs to be considered, as does any review of the terms. Typically the pre-nup agreement will lapse and will need to be reviewed after, say, five to seven years from the date of the marriage.

Does a pre-nup offer real protection?

A well crafted pre-nup can pave the way for a straightforward and amicable financial separation at the end of a marriage or civil partnership.  Although pre-nups are not still legally binding on the English courts, following the Radmacher case the Law Commission advised the government that this should be looked at, and legislation addressing the issue may find itself before parliament in the not too distant future.

However, even now, well-drafted pre-nups are likely to be accepted by the courts as governing what should occur when a marriage ends, and are well-worth considering as a means of protecting your assets.