Everything you need to know about pre-nup agreements

On our recent Levelling With podcast episode, we spoke to Tom Quinn, Partner in our Family Team, to discuss the key things to know about pre-nups. 

What is a pre-nup? 

A pre-nup agreement is an agreement that parties who are shortly going to get married enter in to. Pre-nups govern what will happen to their assets if they end up getting divorced, thereby avoiding what can often be very acrimonious and costly litigation to determine a financial settlement. It’s like an insurance policy, basically, I think that’s probably the best way of characterising it. 

Are pre-nups enforceable in England and Wales? 

No, they are not, and that is a common misconception about pre-nup agreements in this jurisdiction. The courts still have to undertake their assessment of what is fair, and they have to take into account what are called the Section 25 (of the Matrimonial Causes Act) factors. So, they still have to look at the law, but, importantly, provided the pre-nup agreement is properly entered into (see below) they will be attributed very significant weight, the effect of which is likely to make it as good as binding. 

What makes a pre-nup enforceable? 

There are several elements to this, and as such it is always advisable for both parties to get legal advice. Each person will have to be represented by a different lawyer to discuss their interests and for full financial disclosure. Legal advice, particularly for the weaker financial party, is essential so they know what they’re signing up to and what they’re potentially signing away.  

If you don’t fully disclose your financial position, then you could end up in some difficulty down the line if there is a divorce, because the other party may say, “well, I didn’t know that he or she was worth this much money. If had I known, I wouldn’t have agreed to the provision that was made in the agreement”.  

Another important factor is ensuring that the agreement is entered into and brought up well in advance of the wedding. While it’s not technically required, it’s always wise to mention it, I would say, several months in advance (of the wedding/civil partnership) and certainly around the time of any engagement so that neither party is under undue pressure. Usually, it is advisable to conclude the pre-nup no less than 28 days before the wedding or the civil partnership, and never leave it till the last minute.  

Have you got any tips for starting the conversation about getting a pre-nup? 

I think the easiest presentation for a pre-nup is that it is an insurance policy. Given that recent stats say that up to 40% of marriages end in the divorce, I think you can be honest and say that it is a possibility that things might not work out. Ultimately, you’re just saying that if you did divorce, you don’t want it to be acrimonious and that entering into a pre-nup would go some way to protect you both from that situation.  

It’s quite a grown-up way of dealing with things and looking at what might happen. No one really wants to think about it, but we must. It’s the same with life insurance, no one likes to think about dying but to protect ourselves we put a plan in place. 

It’s still not going to be an easy conversation, and the process itself is not the most romantic thing to go through before a marriage, so that’s even more reason to try and do it in advance.  

What is the difference between a pre-nup and post-nup agreement? 

A post-nup agreement largelythe same as a prenuptial agreement, save that a post-nup  occurs after the marriage or civil partnership. The risk with a post-nup where there is no prior pre-nup is that no one’s duty bound to enter into it. I.e.  you can’t impose a post-nup on someone. So, it can be “the horse has bolted” scenario. 

Post-nup agreements also sometimes crop up in circumstances where there has been a pre-nup agreement. What you usually get in pre-nup agreements is a review clause where that agreement will be reviewed in certain circumstances. Key ones are after a certain passage of time, such as 5-10 years, or there are now children or another 
change in circumstance.  

Another example is for estate planning. If a couple got married many years ago and now the parents of one of those individuals is looking to gift monies or business, they may ask for a post-nup agreement to protect those assets in the event of a divorce. 

What do you think people should think about if they are considering drawing up a pre-nup? 

It really does depend on the circumstances of the case. One thing I do tend to advise most clients is to leave anything relating to children out of it, it’s much easier to just deal with that separately at the time of the divorce. Otherwise, the key things you’ve got to think about are housing and potentially maintenance. 

Are prenups just for high-net-worth individuals? 

The short answer is no. I would recommend them for most people nowadays. Of course, the more wealth you have the more it’s recommended, but realistically anyone with assets of any substance to protect should at least look into it. Of course, it’s possible that your solicitor may evaluate your circumstances and advise that, for various reasons, it may not be worthwhile, but that shouldn’t preclude exploring the option (and it is unlikely that there will be much, if any cost involved). 

What advice would you give if you were advising the weaker financial party in drafting a pre-nup? 

So, I think the big one is just having a detailed look at the worst-case scenario. Understand what you’re going to be left with and if that is sustainable. We always want to make sure that the client’s needs are going to be met comfortably.  

What is the biggest mistake that people make when drafting a pre-nup? 

Being too tight and provision being too low. No one wants a pre-nup to come back and be challenged by the other party. That’s the most common mistake that’s made, particularly when you’re putting the pre-nup in place.