Couples in the throes of a new relationship never want to consider that things could go wrong, but it is an indisputable fact some marriages do end in divorce. The use of a prenuptial, pre-civil partnership or postnuptial agreement can help protect finances and assets and avoid lengthy and costly disputes about financial arrangements if the couple separated in the future.

Although these documents are currently not legally binding in England and Wales, they are still very useful. They are one of the factors that the Courts would take into account when determining financial arrangements. So what’s the difference between the two agreements and should you consider having one in place?

What is a prenuptial or postnuptial agreement?

A prenuptial or pre-civil partnership agreement is a written agreement between a couple that are getting married or entering into a civil partnership. It states how finances will be divided if the parties were to separate and is completed and signed before the wedding or civil partnership ceremony takes place.

A postnuptial agreement is also a written agreement between a couple but is signed and completed after the marriage or civil partnership ceremony has taken place.

Benefits of pre and postnuptial agreements

These agreements have various advantages. They are very popular with couples where one couple has substantial wealth that they wish to protect in the event of the relationship breaking down. They are also useful where there are certain assets that either party wishes to ensure remains in their possession.

Protect assets and businesses

They can protect assets and businesses that were acquired or set up by one of the parties before the marriage as well as protecting one of the parties from having to take on substantial debts accumulated by the other party.

Amicable separation or divorce

 By deciding on how finances will be divided between the parties before any relationship difficulties arise will usually make the process a lot easier than if done when they are separating and things are more acrimonious. These agreements can also be used to protect the interests of any children, including those from previous relationships.

Managing finances during the marriage

Although they may seem unromantic, these agreements can be used to assist the start of a marriage and ensure that is lasts. They can be used to determine how the couple’s finances will be managed during the marriage and this is something that can actually prevent disagreement and separation in the future.

Requirements of pre and postnuptial agreements

It is vitally important that any agreement is considered fair if the Courts are likely to uphold them. The Courts will generally recognise these agreements and expect the terms to be followed if the parties can show the following requirements have been met:

Independent legal advice for both parties

Both parties should make sure they have obtained independent legal advice before entering into these agreements. The agreement should be signed by the legal advisor on behalf of the party that they are representing. This shows that the parties understand the implications of the agreement and that their interests have been protected by a legal representative who has advised them properly. In particular, this would mean that the party that has the most to lose understands the implications of entering into the agreement.

Fairness

If the agreement is both fair and realistic, then it is more likely that the Court will not change its terms or make it’s a different financial order. The agreement needs to be consistent with the law on divorce and how assets should, therefore be distributed.

This does not mean that the split has to be exactly 50:50. It is actually more likely that one party will receive more than the other, but it does need to evidence that whatever the decision, it is fair to both parties.

Financial disclosure

This is not a requisite for the agreement to be valid, but it is highly recommended. If the parties are aware of each other’s assets and liabilities, it demonstrates to the Court that they fully understand the financial implications of the agreement. So it is more likely to be allowed by the Courts.

Voluntary agreement

It must be shown that the parties both entered into the agreement voluntarily and that there is no sign of duress or pressure. One way of demonstrating this is to enter into a prenuptial agreement at least 28 days before the marriage or civil partnership.

Review

In order to ensure that the agreements remain valid and are likely to be enforced if they are required, it is recommended that there is a review clause included that states how often the agreement should be revisited. This can ensure that it is updated where when is a change of circumstances in the relationship that affect the agreement and will make sure that it remains valid and fair to both parties.

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