By Joanna Abrahams, Family Partner at Valemus Law
For many of us, the pre-nup (or pre-nuptial agreement to give it its full name) is something we regard as being reserved for the rich and famous. For the likes of, for example, Rupert Murdoch, who has seen his fair share of divorces. Much has been reported in relation to the separation between 91-year-old Rupert and his estranged, yet equally famous wife, Jerry Hall. It is likely that, being the canny businessman he is, and with three divorces already under his belt, the parties will have entered into such an agreement.
However, these agreements are not just for the Murdochs of this world. Indeed, in an era where an increasing number of people own their own properties or have assets that they have accrued prior to meeting their intended spouse, the need to take steps to protect them can be vitally important. Whether someone is set to embark on their first marriage or – in the style of the late Elizabeth Taylor – their eighth, there will often be a need for them to seek informed advice about what steps they could and should be taking should the road to marital bliss take a turn for the worse.
In such situations, there is very often a need for one – or even both – of the parties to seek advice on how to protect what is theirs and ensure a fair division of assets if the marriage breaks down. Which is why the involvement of an independent financial advisor (IFA) can be so important.
While many will assume that a pre-nuptial agreement is a simple, straightforward setting out of what each party can (or cannot) claim against the other in the event of divorce, they often do far more than this. With input from an accomplished financial adviser, a properly-drafted pre-nup can also contain provision for any children of the marriage following the parties’ separation (in terms of housing, maintenance and sometimes schooling) and can also define how the finances will be conducted during the marriage.
The court’s starting point when it comes to reviewing the terms of a pre-nup in divorce proceedings may well be to question whether there are good reasons for departing from its terms. This could apply if, for example, one party did not seek independent legal advice or was pressured to sign the agreement. But if an IFA has played a significant role in the creation of such an agreement, there is more weight to the argument that it should be upheld as both parties understood the implications of their decisionit will also ensure fairness for both parties.
Any IFA involved in a pre-nup has the important role of ensuring that it takes into account the needs of the party for whom they are instructed. It can be the case that the longer the marriage lasts the less likely that one or both parties will be able to preserve all their assets and advice needs to be taken from a specialist solicitor in family law such as what is likely to be a fair outcome. Their role is to see if that can be achieved . Sometimes there is a question of offsetting a pension against a house or investing a lump sum to generate income. But such matters need to be identified and addressed so that any pre-nup anticipates any such circumstances. It can also be advisable for there to be a review clause within the agreement, whereby the parties will revisit its terms after a number of years has passed, children have been born or there have been changes in the employment circumstances of one or both parties.
Critics of pre-nups may argue that there is little or no point entering into one if a court overturns it at a later date. But the flip side to this argument is the situation that many people have to face when they are hit with divorce proceedings – which is that without an agreement in place, the starting point for division of the assets in the marriage is a 50/50 split.
Entering into a prenup isn’t exactly the most romantic thing a couple can do in the run-up to their marriage. But, in such circumstances, the IFA can help by providing more of a level of certainty
However, as indicated above, there are conditions that need to be met for such an agreement to be legally binding; these are:
- Both parties must receive independent legal advice on the contents of the document before they sign it.
- Neither party can be coerced (forced into) signing the document.
- The agreement needs to be signed at least 28 days before the marriage takes place.
If it is too late to enter into a pre-nup – due to the 28-day limit – all is not lost. There is still the possibility of entering into a post-nuptial agreement. Other than its name and the fact that it is being signed following the marriage, the terms of such an agreement are the same as a pre-nuptial agreement and can take into account all the considerations set out above. And, as with the pre-nup, it can be the IFA that can work with the solicitor to pinpoint the issues that matter and seek solutions.
Some may ask why anyone should enter into a pre-nup when a post-nuptial agreement can be concluded at a later date, after all the pre-wedding pressures have dissipated. The simple answer to this is that there can be less incentive on the spouse with less assets to enter into a post-nup. This may not be a palatable thought but there can certainly be far more incentive on parties to sign an agreement prior to their marriage. And the person looking to protect their assets via a pre-nup can always change their mind about the marriage if the agreement is not signed and they have enough concerns to warrant such a step. That option does not exist with a post-nup.
What is clear is that these agreements are far from straightforward. There are a lot of factors that need to be identified and addressed. A couple that tries to draft their own – or does not enter into one at all – will almost certainly end up finding out this was a false economy. It is an area where an independent financial advisor can prove to be a couple’s shrewdt gift to themselves.