What is a prenup?
‘Prenups’ or prenuptial agreements are an aspect of law often sensationalised in the media. For many, it may seem a consideration for the uber-rich or mistrustful partners, but for others this may provide the reassurance necessary to enter into what is not only a personal commitment, but a financial one.
A prenuptial agreement is a legal agreement entered into prior to marriage to outline assets, property and responsibilities upon divorce. The agreement aims to plan for divorce should it come to ensure that each party is aware of the outcome. Generally, this is used by the wealthier party to ring-fence assets to avoid an equal split. This is particularly prevalent with business assets or family wealth that one partner wishes to keep as part of their personal wealth.
Legal status of prenups in the UK
The most common misconception regarding prenuptial agreements is that they are not legally binding within the UK. This means that sensationalised media representations of prenuptial agreements that better reflect American conventions are predominantly fiction in the UK. Marital assets following divorce are decided by the court with the most influential factor being not any existing arrangements, but ensuring the needs of any marital children. Divorce proceedings in the UK are governed by notions such as ‘fairness’ that prevent parties from contracting out of their financial obligations to each other, but have also expanded to recognise the autonomy of consenting adults over time. Consequently, the court may take a prenuptial agreement into consideration in their decision.
Agreements must be considered ‘fair’ to be considered by the court. Fair, contextually, may be ring-fencing your personal wealth but providing an allowance for your partner to live on if they do not have their own income. This can extend to providing a house for your partner to live in with your child if they are the main carer. The court also considers how informed the other party was in the decision to agree to the prenup. For the agreement to be considered, there must have been full understanding of the agreement, full disclosure of assets and in most cases, independent legal advice to determine whether to enter into the agreement. Thus, it is evident that the bar is high for a prenuptial agreement to be considered by the court upon divorce.
Nonetheless, where agreements are entered into correctly with the necessary safeguards for children and the financially weaker party upon divorce, the court will take this into account. Though it is worth noting that ‘take this into account’ does not translate to ‘accept their entire agreement in full’.
When should I use a prenup?
These examples can illustrate situations in which a couple are more likely to pursue a prenup:
- One party is, or is going to be, significantly wealthier (or more indebted) than the other
- One party possesses family assets that they, or their family, do not want the other to be entitled to
- One party possesses business assets that they do not want the other to be entitled to
- It is not the first marriage of one, or both, of the parties and/or there are children from another marriage
However, the simple answer is: when it suits your personal circumstances.