Is there a benefit to non-HNWs having a pre-nup?
The simple answer is yes. An agreement (if properly drafted) should give you more certainty than facing a judge’s decision after a lengthy and inevitably costly court battle. There is generally the assumption that legal fights centre around the division of assets, but often the most difficult cases involve the question of who will take over the burden of debt accumulated during the marriage and who may have the chance to walk away without any liabilities. If there is not a lot of cake, every crumb can take on significance.
Our legal system is highly discretionary and based on the premise that the outcome should be ‘fair’. But, as we all know, ‘fairness’ is difficult to define. As advisers, we can only provide our clients with the type of bracket into which we anticipate a judge’s order will fall, and with that risk comes legal costs. Although an agreement cannot provide for every eventuality, it can certainly narrow the parameters and should include a provision to review terms at regular intervals or on the occurrence of specific events. An agreement puts the control back into the hands of the parties so that they can – in an ideal world, with the assistance of their advisers – work out what they think is fair for them in their unique circumstances.
Perhaps the most compelling reason for a pre-nup is non-legal. When negotiating an agreement, you are opening a dialogue with your future spouse – about your hopes and expectations. It encourages you to talk about some of the more difficult (and potentially confrontational) aspects of your marriage and helps potentially to avoid any nasty surprises or fallouts further down the line.
For example, in the case of a younger couple, you may both be working now but what will happen if you have children? Will you both share the care or will one of you put his or her career on hold? Should the person who stays at home be financially compensated in some way? Or are you both insistent that childcare should be split equally down the line regardless of the potential impact on both parties’ careers?
What should happen about debts – are these to be shared – particularly if university debts have enabled you to obtain the job that is now supporting the family? What happens if you win the lottery or inherit from granny? If you have been married before, you may want to ensure that you retain your investment in a property in its entirety and not share it with your spouse if you separate.
Individuals from all walks of life and ages can benefit from the protection of a pre-nuptial or pre-civ agreement (for same sex couples). Indeed, even individuals who are not planning to marry, but to cohabit, should consider whether to enter into an agreement to regulate their financial arrangements during and after cohabitation.
Although pre-nuptial agreements are not binding under UK law, following the case of Radmacher v Granatino the court will take into account the existence of an agreement as one of the factors to consider when determining what financial order to make.
Don’t be put off by the thought of having that potentially awkward conversation with your future spouse. It may well be worth it as who knows what the future may hold.