A prenuptial agreement – or pre-partnership agreement in civil partnerships – is an agreement between the two partners, before they formalise the relationship, designed to set out financial arrangements and protect their separate property in the event of a permanent separation.
Such agreements are not yet legally binding in the UK but were given legal weight by the Supreme Court ruling in the case of Radmacher v Granatino in October 2010. In February 2014, the Law Commission also recommended that the government should put in place legislation to introduce what it calls “qualifying nuptial agreements”.
The Law Commission recommends that these nuptial agreements – including those made before or after a marriage or civil partnership or in contemplation of separation – should be enforceable contracts, not subject to the scrutiny of the courts, which would enable couples to make binding arrangements about the financial consequences of divorce or civil partnership dissolution.
With this favourable view of such agreements, more and more couples are likely to consider putting them in place. For example, they may be appropriate for people marrying or forming a civil partnership later in life, when they have more individual assets that they may wish to keep outside the partnership “pot” of shared property and wealth that could be divided on a 50-50 basis if the relationship breaks down.
Those who have been through relationship breakdown previously may be keen to protect any settlement arising from that relationship. If there are children from a previous relationship, the child’s parent may wish to ensure that assets are preserved for those children, rather than going to their new partner.
The decision to put in place such an agreement is one that requires careful consideration and will not be every couple’s choice. In making the decision, some points to bear in mind are:
- allow plenty of time for the drawing up of an agreement – the recommended minimum is 28 days before the ceremony;
- both partners should take independent legal advice (and, if necessary, accountancy advice) before entering into an agreement. This protects both partners against any future claim that they were pressurised into such an agreement;
- both parties must be prepared to fully disclose all their assets and financial circumstances;
- the agreement should make it clear what happens to the assets belonging to each partner before the civil partnership or marriage, as well as those accumulated during the relationship;
- it should cover what happens to the couple’s home, in terms of who lives there and division of the proceeds if it has to be sold;
- It should also contain review clauses, for example, on the birth of a child.
As circumstances also change during the relationship, whether through the birth of children or inheriting wealth, it is advisable to keep any agreements up to date.
Where a couple has entered a marriage or civil partnership without an agreement, they can also put in place a post-nuptial or post-partnership agreement to establish financial and other arrangements in the event of a dissolution or divorce.
For more information about our prenuptial and postnuptial agreement legal services, please contact us.