Pre & Post-Nuptial Agreements For Family Wealth

A pre-nuptial or post-nuptial agreement can record how you intend your financial interests to be treated if your marriage later ends. Although it does not remove the court's powers, a properly prepared agreement can carry substantial weight and bring clarity to an issue that might otherwise become contentious.

Using marital agreements to protect family wealth

A pre or postnuptial agreement allows a couple to identify assets that one of them has brought into the marriage and state what should happen to them on divorce. This might provide that a particular asset remains with its original owner or that the other spouse receives alternative financial provision. An agreement can also separate personal family wealth from assets the couple intend to build and share during the marriage.

Although an agreement can give reassurance, it should not be treated as an absolute guarantee that everything will be shared in accordance with its terms. This is because the court retains responsibility for deciding what is fair at the time of divorce, while also balancing the needs and welfare of any children.

Assets that can be addressed

An agreement can deal with both existing and anticipated assets, including, but not limited to:

• Inherited wealth or property
• Shares in a family business
• Interests under a trust
• Investment portfolios
• Valuable personal possessions

An agreement can also define the relevant assets one spouse wishes to retain and set out how records will be maintained during the marriage. Where a trust is involved, the document should reflect the true nature of the spouse's interest and must not suggest that either party can dictate how independent trustees exercise their powers. Essentially, the more control an individual can exert over a trust, the less likely the court is to consider it a ringfenced asset.

The difference between pre-nuptial and post-nuptial agreements

A pre-nuptial agreement is signed before marriage, whereas a post-nuptial agreement is entered into after the wedding, either soon afterwards or, in some cases, many years later. Both can cover the same financial matters, and the courts apply the same principles when considering their effect.

A post-nuptial agreement may be appropriate where there was insufficient time to complete a pre-nuptial agreement before the wedding, or where circumstances have changed since an earlier agreement was signed. The fact that the couple are already married does not remove the need for a free and unpressured agreement, separate advice, and proper financial disclosure.

The legal effect in England and Wales

Pre and post-nuptial agreements are not automatically binding in England and Wales and cannot remove the court's power over making financial orders during divorce. However, where an agreement was freely entered into, the court is more likely to uphold its terms. The court examines how the agreement was made, what each person understood, and whether its outcome remains fair in the circumstances surrounding the divorce.

Factors that strengthen an agreement

Each person should make the decision to sign a pre/postnuptial agreement voluntarily and understand the rights they may be giving up. The following issues may cause the court to question an agreement’s validity:

• Signs of pressure, exploitation, or misrepresentation
• An agreement presented as a last-minute condition of the wedding
• Lack of, or incomplete, financial disclosure
• No independent legal advice

One solicitor should not advise both parties as this is likely to be viewed as a conflict of interest. A signed acknowledgement of advice is useful evidence, but the substance and quality of that advice matter more than a box ticking exercise. Financial disclosure also allows each person to appreciate the implications of the agreement, and should be sufficiently clear and current to reveal the nature and approximate value of relevant assets. Deliberately concealing or understating personal wealth could seriously weaken the agreement. 

Changes after signing and regular reviews

A nuptial agreement is assessed against the circumstances that exist when the court is asked to make financial orders, not simply those anticipated on the signing date. Things like the birth of children, serious illness, or a substantial change in wealth may affect whether or not it remains fair to follow the original terms. Standard changes anticipated by the agreement do not necessarily displace it, which is why it is sensible to plan carefully in advance.

An existing agreement should be reviewed periodically to ensure that it remains appropriate for the couple’s circumstances. It may specify when a review should take place, such as after the birth of a child; becoming parents can significantly change a couple’s financial responsibilities, particularly if one spouse reduces their working hours to provide care. A review may also be appropriate following a substantial inheritance, as the agreement may not adequately address how that wealth should be treated.

Even where the document contains no review clause, a significant change in circumstances should prompt the couple to reconsider its terms. Any agreed changes should be formally recorded in a properly prepared post-nuptial agreement. Both spouses should provide up-to-date financial disclosure and obtain separate legal advice so that they understand the revised terms and their implications.

Laurus can review earlier agreements, identify terms that are no longer suitable and advise whether a fresh document or a more focused variation is appropriate.

Beginning the process in good time

Couples should begin discussions several months before the wedding wherever possible, allowing enough time to understand the financial arrangements and consider the proposed terms. Where one person owns a business, obtaining a professional valuation may take time. Wealth held in trust can also require closer examination to establish what resources are available and how the agreement should address them.

Leaving the process until the final weeks can make it difficult for either person to consider the agreement properly. As the wedding approaches, one partner may feel under pressure to sign rather than seek changes or risk disrupting the plans. The time needed will depend on the complexity of the couple’s finances, so seeking advice soon after the engagement is announced gives both parties a better opportunity to negotiate freely.

For a post-nuptial agreement, advice should be obtained before the event that prompted it, such as the completion of a property transfer. As a highly rated law firm with specialist family solicitors, Laurus can guide both the individual and, through separate representation for the other party, the wider process needed to give the agreement the best prospect of carrying substantial weight if the worst happens.

Contact us now to request a free consultation with one of our specialist family solicitors.