Even for the wealthiest client, life is not all diamonds and rosé. As any family lawyer knows, heartbreak is the great equaliser and even dinner at Annabel’s can’t dull the ache (at least, altogether). 

21st century wealth is multifaceted and various. A footballer at 21 can earn more in a week than many do in a year. Entrepreneurs can build businesses worth billions from the comfort of their back bedroom. Dynastic wealth continues to drip down the bloodline: the list goes on. 

And then these individuals fall in love…and then out of love and into a solicitor’s office. It is unfortunately a common occurrence, resulting in significant costs: both financial and emotional. The phrase “fall in love” belies the sad reality that relationships, absent planning, could leave even the most cynical spendthrift vulnerable.  

Wealth planning is not a foreign concept to wealthy individuals. Indeed, it is common practice. Considered and nuanced investment planning, tax mitigation, insurance: the list goes on. Clients should look to treat their relationships with the same risks associated with poor wealth management and make enquiries about prenuptial agreements. 

What is a Prenuptial Agreement?

A prenuptial agreement is a legal agreement made ahead of a marriage.  The primary purpose of the agreement is typically to outline how the parties wish their assets to be divided if they later divorce. 

In England and Wales, prenuptial agreements are not legally binding, but they are likely to be upheld in circumstances where the agreement is considered by the court to meet the needs within the circumstances of the case. In establishing at what level those needs should be met, the court has provided guidance in case law which is fairly prescriptive, and the guidance around prenuptial agreements includes provision for financial disclosure and independent legal advice at the time of entering into the agreement. Increasingly, the courts are taking a robust approach and enforcing prenuptial agreements wherever possible.

For high-net-worth individuals, understanding the legal landscape surrounding prenuptial agreements is crucial. Such agreements provide a proactive means of safeguarding your assets, including property you may acquire during the marriage, like inheritance. They can also outline arrangements for the servicing of any debts, income and housing.

The Pros of Prenups 

A prenuptial agreement is more than just a legal formality; it’s an important tool for financial planning and protection for several reasons:

• Asset protection: high-net-worth individuals often enter a marriage with significant assets, such as property, investments and business interests. A prenuptial agreement can help to safeguard pre-acquired assets, ensuring they remain protected in the event of a marriage breakdown.
• Clarity and certainty: by clearly outlining the financial arrangements and expectations from the outset, prenuptial agreements bring a sense of transparency and certainty, the benefit of both parties. 
• Reducing conflicts: Aligned closely with the above, having a pre-agreed plan for asset division reduces the scope for conflict and lengthy legal disputes, which can be both financially and emotionally taxing. This can help ensure a more collaborative working relationship, for co-parenting purposes for instance. 
• Business continuity: for those who own or have a significant stake in a business, a prenuptial agreement can ensure that their shareholdings remain unaffected in the event of a marital breakdown.
• Safeguarding family interests and legacies: A prenuptial agreement can ensure that inheritance, including heirlooms remains within the family.

Something Old, Not Something New: Timing and Planning for a Prenuptial Agreement

When considering a prenuptial agreement, the timing and planning of the discussion with a future spouse are as important as the content of the agreement itself. It’s prudent to consider prenuptial agreements well in advance of any marriage plans. 

This allows both parties ample time to understand the implications, seek independent legal advice, and engage in open discussions without the pressures of the impending nuptials. 

Why Legal Advice is Important 

Drafting a prenuptial agreement requires careful consideration to ensure it meets the legal standards and addresses your personal needs. A legal professional, experienced in this type of work, will be able to consider a prenuptial agreement in the round and in particular:

• Whether the agreement meets needs;
• Whether the financial disclosure provided is sufficient;
• Whether there are any other considerations that are required, including mirror prenuptial agreements in other jurisdictions; and 
• Ensure that you understand the terms of the agreement and the effects of the same in the event that it is upheld by the Family Court. 

Postnuptial Agreements: An Alternative for Married Couples

While prenuptial agreements are planned before marriage, postnuptial agreements offer a similar form of protection and clarity for couples who are already married. Circumstances and perspectives can change after marriage, and a postnuptial agreement can be a valuable tool for high-net-worth couples in these situations.

A postnuptial agreement might be suitable for the following reasons:

• Changed financial circumstances: if there have been significant changes in your financial situation since your wedding, such as inheritance, business success or career advancement, a postnuptial agreement can help in recalibrating financial arrangements in your marriage.
• Reconciliation after separation: couples who have separated and are reconciling might use a postnuptial agreement to create clear financial terms as part of their reconciliation, providing a fresh start and agreed-upon foundation.

Like prenups, postnuptial agreements must be entered into voluntarily, with full financial disclosure from both parties. They should be fair and properly documented and, ideally, both parties should receive independent legal advice.

Pre and postnuptial agreements are difficult to discuss. It can feel unromantic and an added stress in the run-up to the “happiest day of your life”. However, discussing a prenuptial agreement today allows both parties to enter into the relationship with clarity, certainty and confidence.

If you would like to start the conversation about a prenuptial agreement, please contact our team confidentially on 0345 872 6666 or fill in our online enquiry form to request a call back.