If a couple divorce, the approach taken to the division of their finances can depend on the length of their marriage and the needs of their family.
Whilst a couple will go into their marriage hoping that it lasts for the rest of their lives, it is difficult at the time of a marriage to predict with any certainty how long that marriage might last or what a couple’s needs might be at the time any divorce takes place.
For a person who is bringing a house into a marriage, or other assets such as a business interest or a large inheritance, this can leave them feeling vulnerable.
This is where pre-nuptial agreements can be of immense value.
How can pre-nups and post-nups protect your finances in the event of divorce?
These agreements provide the couple with control over their affairs. As long as the agreement is drafted in a way to ensure that the reasonable needs of them both can be met, both parties can agree the principles that will be followed if ever they divorce.
It might be that a particular asset is earmarked for one of them, such as a house. It might provide that a particular class of asset ought to be excluded from any claims, for example any inheritance, received or anticipated.
These kinds of agreements can be used in a number of different ways. For example, to define rights against a pension, preserve particular assets for children from a previous marriage or ensure that assets that have been in the family for generations are free from the spouse’s claims.
The benefits of pre and post-nuptial agreements
Pre-nuptial (and post-nuptial, which are agreements entered into after the marriage) agreements have the effect of changing the default approach on divorce.
Provided the couple have each been separately advised and there has been full financial disclosure, the onus will be on the person looking to overturn to the agreement to demonstrate that it does not adequately provide for them. Compare that with the approach if there were no agreement: the onus would be on the person looking to preserve the asset to explain to the court why it should be left out of the division.
We have found that the divorces we deal with involving a pre or post-nuptial agreement seldom lead to any dispute. This ensures that the couple split on more amicable terms than may otherwise have been the case, but also that the costs are not nearly as expensive as a contested divorce.
Over recent years we have seen these types of agreement become less of a taboo and they are now considered a much more prudent financial planning step. When one considers that over 40% of marriages now end in divorce, it is easy to see why they are so popular.
This article is part of a series on the various benefits of pre and post-nuptial agreements:
- How can I give my child money without their spouse having a claim?
- Parents, pre-nups and paying for house deposits
- Second Marriage & Adult Children – how to address financial concerns
- Inheritance & Money – what are the consequences of ‘mingling’ inherited assets?
- Farming pre and post-nups – benefits for succession planning
- Tax planning for families – the benefits of pre and post nuptial agreements