Family Wealth: Time to Protect Your Assets?
Should you consider a pre-nuptial agreement? Elizabeth Hassall from HM Legal has the answer
As a specialist family lawyer, I am often asked these questions by the family accountant or commercial adviser involved in tax planning. Parents may want to pass on their wealth as cash, property โ a house, commercial premises or land โ or shares in a family business. The family might have worked hard to build prosperity or perhaps assets have been passed down through many generations, such as with a farm or unique heirloom in a Family Trust.
One concern is that assets might be threatened (or lost completely) if the younger generation with the benefit of family assets gets married, and undergoes an acrimonious divorce.
Pre-nuptial or pre-marital agreements are only relevant when agreed ahead of a marriage or a civil partnership. They are not for cohabiting couples who are not planning to tie the knot (but intend to live together). In this situation a cohabitation agreement would be appropriate instead.
Courts have decided that pre-nuptial agreements are not automatically binding. The Law Commission has recommended that the law be changed and successive governments have had different priorities. Currently there is no sign of a change in the law.
Are pre-nups worth doing?
Yes. If the couple wants to protect existing assets, or assets which might be inherited or given to them. Each party must be separately represented by a family law solicitor with experience in this field. The individuals must make full and frank disclosure of all assets โ which is often when the family accountant, financial adviser or family members help with clarifying assets. The agreement must be completed at least 21 days before the ceremony to avoid allegations of undue pressure. These prerequisites are vital. If they are not followed, the court will not uphold the agreement if tested during a divorce.
Based on a divorce rate of 42% for first marriages, it makes sense to consider having this conversation, especially if children are in the picture, or there is an imbalance of wealth or inheritance prospects.
What if you have already had the ceremony? While it is too late for a pre-nup, you could consider a post-nuptial agreement. The latter is hard to negotiate as each person has rights and obligations under family law. A post-nup can assist if a pre-nup agreement was being planned and time ran away with the couple.
What about cohabiting couples?
During lockdown some parents injected vast sums of money into their childrenโs home so they could move from cities. Quite naturally parents wanted to protect their investment via a cohabitation agreement signed by their child and the live-in partner. Courts favour these agreements which do not have the negative PR that a pre-nup does!
If you are interested in having a conversation about your options, please ask Elizabeth and the friendly team at HM Legal for advice: hello@hm-legal.co.uk
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