While getting married is a time of celebration, both parties should be aware that marriage gives rights to claims over the other party’s capital, income and pensions. It is therefore sensible to consider your individual assets prior to marriage and what you both feel should happen with them should you later divorce. Some couples choose to consider a pre-nuptial agreement prior to signing on the dotted line, but what does this mean in reality?
Well, the purpose of this type of written agreement is to document what will happen to each party’s assets should the marriage end. In England and Wales, pre-nuptial agreements aren’t automatically legally binding so a court can still reserve the right to decide how assets are split on divorce. The court will consider all of the circumstances at the time of the divorce, including whether there is a pre or post-nuptial agreement; it will then decide what, if any, weight should be given to the agreement itself.
With this in mind, are there any benefits of pre-nuptial agreements and pre-marital agreements? Here’s everything you need to know.
Get clarity and protecting assets
When creating a pre-nuptial agreement, each party can gain clarity on the assets belonging to the other. The agreement will clearly set out what assets should and should not be shared upon divorce, should divorce later become a reality. . It will enable both parties to set out their understanding of how those assets should be owned and shared or “ring fenced” from sharing, for example inheritances, gifts from third parties and business assets.
Honest and transparent start to a marriage
Discussing finances is often a difficult part of any marriage, so being open and honest about them before you get hitched sets a benchmark for good communication. During the process of agreeing and preparing a pre-nuptial agreement, full financial disclosure should be provided by each party allowing couples to be transparent about the true value of their existing assets, income and pensions. It also gives couples certainty from the outset about how finances would be split if they ever divorce.
Family lawyers will tell you about the importance of future planning, and pre-nuptial agreements can do just that. For example, you can agree to compensate one party more during a divorce process should they give up a career to bring up children, as they will have less earning potential in the future. If you have children already, it can also help to protect their financial interests.
A pre-nuptial agreement can protect pre-acquired assets, such as a property purchased prior to the start of the relationship or capital assets already held by one party. It is very important however to appreciate that as your circumstances change, a pre-nuptial agreement should be reviewed. For example, it is important to take legal advice and review a pre-nuptial agreement if you were to have children as the courts are unlikely to support any terms in the agreement which are deemed to be harmful to the interests of a child.
Lower divorce fees
While nobody wants to think about the possibility of separating when engaged to be married, the cost of divorce should be something to consider. If neither party disputes the agreement, then whilst there are costs incurred in preparing a pre-nuptial agreement, those costs will be less costly than the time taken to litigate financial agreements in court when divorcing, which can be more complex.
A divorce is never an easy process for anyone, especially when emotions are involved. Even those couples who consider themselves to be separating amicably can soon find communication breaks down and disagreements occur when it comes to financial settlements. Setting out how assets will be divided in a pre-nuptial agreement can lead to a more amicable divorce process.
Need a pre-nuptial agreement? Get in touch
For more advice about pre-nuptial agreements and family law, please get in touch.