Prenuptial agreements - beauty or a beast?
Whether you love or despise them, prenuptial agreements are on the rise, especially amongst people who have amassed considerable wealth or are from a wealthy family who demands the family silver be protected!
We are also increasingly helping clients with prenups who are marrying for the second time and/or have children from earlier relationships that they wish to protect financially.
Prenups are not new, and we are all familiar with celebrities diving for cover in their carefully crafted, contractual bunkers when the marriage fizzles out. No doubt Prince Harry and Meghan Markle will have to consider some type of prophylactic but what about the rest of us? Don't we need help from relationship apocalypse bearing in mind approximately 42% of marriages break down? My mantra is if you can't protect yourself from falling in love and marrying, you can at least protect yourself from the horrors of an acrimonious financial split if you have a proper prenup.
I sympathise with people who are embarrassed at the prospect of negotiating an agreement to deal with the end of a marriage that has not yet even begun, but there is no need for awkwardness. After all, shouldn’t we all prepare wills before we die to avoid chaos for our loved ones on our death although I am not for one moment suggesting, divorce is as inevitable as death! The best way to dealing with the discomfort is to try and be fair and transparent as possible with your partner as the agreement is being negotiated. It should not be a one-way street, and as a lawyer, I always try in the interest of fairness to all concerned to include a financial safety-net for the financially weaker party. This has the added benefit of ensuring that the prenuptial agreement can withstand the scrutiny of the court if the marriage fails because the court will want to ensure that as a minimum, the agreement is fair otherwise it has the power to toss it to one side. Generally speaking, there is no denying, however, that in almost every prenup, one of the parties will 'win' and retain their wealth (often pre-marital or inherited) and the other will 'lose' which means relinquishing certain financial claims they might otherwise have. The key purpose of the prenup is to try and oust the jurisdiction of the court and to achieve certainty for the parties if the marriage fails.
Prenups can, however, also substantially reduce conflict and cost while giving the parties control. It is well known that people prefer predictable outcomes and it should be noted that although the Law Commission recommended in 2014 that prenups should be legally binding in the UK, this hasn't been enforced yet. Instead, courts are taking matters into their own hands, and family lawyers have seen numerous recent cases where prenups are given decisive weight by the courts and treated as if binding but only if they are voluntarily entered into, properly drafted and meet certain safeguards. Lawyers play a vital part in ensuring that the prenup is properly put together so that it can withstand judicial scrutiny. As I tell my clients, if a prenup is to serve as a lifeboat in troubled waters, you'd better make sure it's seaworthy from the very outset!
A prenup is a carefully crafted, bespoke document – please beware the temptation to download or recycle someone else's because one size does not fit all when it comes to agreements like this! And most of all, please concentrate on what is to be shared, not just excluded, since no one wants to feel cheated at the altar!