There is now record demand for pre-nuptial agreements among millennials in the UK as there is now a ‘broader acceptance that inherited wealth might not be split equally on divorce’. In what is being called ‘pre-nup season’, family lawyers are seeing an increase in interest in pre-nuptial agreements that aim to protect family wealth and potential business windfalls.
‘Pre-nup season’ has seen couples getting their financial affairs in order from early on in the year. This precedes the UK’s traditional wedding season which falls from April to October. Law Firm TWM have explained that the popularity of the pre-nup has seen a rise in the last few years and has been sparked by millennials obtaining significant wealth ‘earlier than previous generations’. In addition, the increase has been driven by couples entering their second marriage seeking protection of assets from children born in a first marriage.
TWM’s Caroline Keeley said:
‘It feels like pre-nups are still a relatively new concept in the UK, but they’re becoming increasingly popular. Enquiries have multiplied dramatically in the last couple of years. Having lost their stigma as being unromantic, pre-nups are now seen by many modern couples as a practical tool to safeguard assets and ensure each party’s financial wellbeing.’
Keeley offers her top tips to enter into a pre-nuptial agreement the right way:
Get the timing right, sign at least a month before wedding
Many couples leave organising their pre-nup to the very last minute, but these are complex, bespoke documents that require time to draft.
Aim to contact your solicitor at least three months before your wedding. This ensures time to gain a general understanding of matrimonial law and draft an agreement you’re completely satisfied with before it is sent on to your partner who should then follow the same steps with their solicitor.
It should be signed at least a month before the wedding, so that neither party is under duress to sign.
Do not try to start the process too early before you have planned the wedding however, or you risk the agreement not being up to date by the time the wedding happens. Your pre-nuptial agreement must be made in contemplation of getting married and so the wedding should usually take place within 12 months of signing the agreement.
Beware the online pre-nup, unlikely to hold up in court
There are a number of companies who promise to deliver a pre-nup online within minutes. It might sound convenient – and more affordable – but if things go south and you end up in court, these agreements are unlikely to hold up.
For a pre-nup to have legal weight it needs to be shown that both sides knew what they were signing, which is why showing that legal advice was given is essential.
A pre-nup is not binding on the English courts but it does set out guidance and protections that – if drafted well – will be respected by the judge. It’s essential that a couple works with solicitors they trust to draft a robust agreement that sets out appropriate protections for each party.
Entrepreneurs and senior executives looking to protect their gains from a company’s sale or IPO can add shares and options
A pre-nup is not only about protecting your current net worth, it’s also about protecting potential future wealth. If you’re an entrepreneur with a growing business or a senior executive with potentially valuable share options, you may want to prepare a pre-nup just to protect the windfall you might get from the sale or IPO of that business. You can also protect potential future inheritances.
Disclose everything
It’s much better to over disclose your assets than risk leaving something out. Individuals should be willing to discuss all their financial assets with their solicitor and be as precise as they can. If you have multiple bank accounts, investments and business interests, tell them where they are, what they’re used for, exactly how much is in them.
The more information your solicitor has, the better they can understand your position and deliver an agreement that can safeguard your financial future.
Pre-nups can help reassure the financially weaker party that they are going to be looked after if there is a divorce
Pre-nups are not just about safeguarding the assets of the financially stronger party, it’s also about protecting the other person in the relationship and giving them a degree of security.
If there is significant wealth disparity between the two parties, provisions will need to be made for the financially weaker party. It doesn’t necessarily have to be a 50:50 split, but without robust and well thought out provisions, the agreement will be at risk in court. I always advise clients to be very open with their partner throughout the process.
