Insuring your ‘happily ever after’

 

As we look forward to 2021, in the hope of the changes it will bring, more couples are starting to look to set their wedding date.  With pre-nup agreements becoming more popular, particularly with celebrities, in general they still seem to have a “Marmite” effect. People either love them or hate them.

So when every engaged couple is hoping for a ‘happily ever after’ and are busy preparing for their special day, why should they start thinking about preparing a document that involves time and cost, and ultimately seems to be expecting the end of the marriage before it has begun?

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We have been living through an unprecedented year, full of stresses and strains, many of which could and would not have been imagined in previous years.  Within our family wealth team we have seen the impact this has had on personal relationships, putting pressure on couples, not just during ‘lockdown’ but also more widely on their day to day life.  Suddenly the family home has become the place of work for one, if not both, of them.  Childcare arrangements have become frequently unpredictable. Add into this the pressures of financial uncertainty in terms of business planning and investment fluctuations.  It has not been an easy year.Before COVID, we experienced that some couples find having a pre-nup agreement actually helps their relationship during their marriage so that separation is less likely.  They have the opportunity at an early stage to discuss their expectations and decide how they will own their assets.  Having agreed these, they have certainty and so can avoid festering arguments in the future, for example about who owns what and has the right to make financial decisions.  In a COVID and post-COVID world, the opportunity to take steps to remove layers of uncertainty is all the more appealing for increasing numbers of couples .Having decided that a pre-nup agreement is a good idea in the circumstances, it can be daunting to think about discussing this with a fiancé or fiancée.  Over time, such agreements are likely to become more common place, as is the case in other countries, but for now one of the best ways of thinking about a pre-nup is by likening it to the insurance policies you already have in place.  You wouldn’t own a car without insuring it, and lots of people are now arranging wedding insurance to cover any unexpected incidents that might imAs we look forward to 2021, in the hope of the changes it will bring, more couples are starting to look to set their wedding date.  With pre-nup agreements becoming more popular, particularly with celebrities, in general they still seem to have a “Marmite” effect. People either love them or hate them.So when every engaged couple is hoping for a ‘happily ever after’ and are busy preparing for their special day, why should they start thinking about preparing a document that involves time and cost, and ultimately seems to be expecting the end of the marriage before it has begun?pact on the wedding day.  You hope you never need to rely on that insurance, but you have it in place, just in case, for peace of mind.

3 reasons for a pre-nup

1) The automatic prenup

Everyone who gets married without their own pre-nup agreement in place is automatically signing up to have their finances on any separation dealt with in accordance with the laws created by the Parliamentary Acts and cases interpreting those Acts.  Even where a couple have agreed the terms of their settlement themselves, in order to have a binding financial settlement as part of divorce proceedings, a judge must be asked to approve that settlement as being fair and reasonable based on the law at the time.Essentially the couple are handing over the decision about what will happen to their finances on any separation to government ministers, members of Parliament and judges.

2) A matter of trust

Most people who are married, or thinking about marriage, have a view on what financial settlement they think would be morally fair if they were to separate. No doubt family and friends will also have their own views. Sometimes this leads to a short discussion with their partner about this and they may even go so far as to write something down.Whilst at the time of the discussion they may both genuinely believe that they are making an unbreakable commitment to the other, it is not actually binding.  If they later separate, any judge will be looking at the circumstances at the time and any informal discussion is unlikely to carry any weight in their considerations.  This means that the couple are solely reliant on the trust that they have between them to stick to what they have agreed in future.

3) Dealing with the unexpected

Relying just on the law at the time to deal with division of assets on any separation can have consequences that the couple and their families may not expect or predict. Assets that they would never have expected to have to share with the other person on separation may not be ring-fenced from the division of their assets, allowing their spouse to bring claims against them, such as inheritance they have received from close relatives or a business they have built up before marriage.  Large loans given to them during their marriage by family members, even those they feel morally bound to pay back, will not automatically be taken into account by any judge and will not be treated in the same way as debts to third parties, such as mortgages.Take as an example the property that a couple may own when they get married.  They may each have properties in their sole names, and choose to move into one property in particular.  Properties that have been treated as a family home are looked at differently by a court than investment properties that have been kept in one person’s name, completely separate to ‘matrimonial’ assets. This could lead to one person not only being able to keep their investment property, but also successfully bringing claims for a share of the equity in the family home.

The future of pre-nups

We are still waiting for the parliament to change the law relating to prenuptial agreements, now officially known as pre-marital agreements, to make them automatically binding on a separation.  The Law Commission have recommended the introduction of ‘qualifying’ nuptial agreements.However, in the meantime, the decisions of judges in recent cases are pointing towards judges giving effect to pre-nuptial agreements, properly drafted by experienced lawyers, as long as the provisions are seen to be fair and leave neither party in financial difficulty, when deciding the settlement in any proceedings between divorcing couples about their financial matters.Crucially there is a key practical effect of having a pre-nup agreement that should not be ignored.  By having a formal agreement in place, for many separating couples court proceedings will simply not be needed, because they have already agreed a settlement with which they are happy, saving unnecessary legal costs and acrimony, and benefitting their family in the long term.If you would like an initial chat about how a pre-nuptial agreement can help you, your family or your clients, please do contact our Family Wealth team.