Henry Hood discusses the use of nuptial agreements to protect family wealth

Using Pre and Post Nuptial Agreements (PNA) to protect family assets

Henry Hood, Partner and Head of the Family Department

What are PNAs?

They are agreements entered into by parties to a marriage or civil partnership, which seek to decide what financial arrangements would be made in the event of dissolution of the union. A pre-nuptial agreement is entered into prior to the ceremony, a post-nuptial agreement after it.

Are they binding?

For years it was thought they were worthless, and this myth is still widely held. However, while the Courts can disregard their terms, where the parties are properly informed about all necessary circumstances (particularly relevant finances) and legal implications, are exercising their free will, and where the effect of the agreement is not unfair in the circumstances that apply when it is put into operation, the agreement will be upheld.

What are some of the advantages for those looking to protect family wealth?

PNAs are often used where one party has, or will receive, a gift, inheritance or trust distribution from his or her family in assets or heirlooms, which they wish to keep out of any future divorce.

In an era of significant divorce awards, using a PNA to limit the provision which can be made on divorce allows firm plans to be made for the devolution of dynastic family assets. For the party marrying in to the family, a PNA can provide reassurance about the level of provision which would be made for them in the event of a divorce.

For those entering a second (or later) marriage, when there are likely to be existing family ties and obligations which a later marriage might be perceived as threatening, a PNA can ensure that the second spouse is not seen as a threat by an existing family who can then welcome them fully.

PNAs also reduce the potential for expensive and potentially public divorce litigation because so much will have been anticipated and agreed upon in advance.

Important ingredients

(i)        Both parties have independent legal representation from specialist family lawyers who     can explain the effect of an agreement and how it would change the position.

(ii)        All parties have sufficient knowledge of all relevant financial information (including            likely future circumstances) to make a decision about the suggested terms of the PNA.

(iii)       For pre-nuptial agreements, the agreement should not be left to the last minute. The rule of thumb is that agreements should be signed 28 days    before the ceremony as a minimum, although some are done later than that and may still be upheld.

(iv)       The terms of a PNA should not leave a party in a position where they might be     unable to meet their needs, even if that means sharing the assets the PNA is intended to protect.

If you are considering entering into a PNA and would like some advice, contact Henry Hood on 020 7412 0050 or Henry.Hood@hunterslaw.com.