Advantages
- Clarity. There are no black and white guidelines in divorce law which distinguish matrimonial from non-matrimonial property. With a nuptial agreement, you and your partner can clarify exactly what property is to be treated as matrimonial and what property is to be kept out of any divorce settlement.
- Certainty. The law allows for a fair amount of discretion when it comes to deciding a divorce settlement and this adds time and stress to the process for sorting things out. With a nuptial agreement, you and your partner can decide, from the start of your marriage or civil partnership, how your property is to be divided should you separate or divorce.
- Transparency. You and your partner disclose your assets and income to each other so you both know exactly what you need to negotiate over in the settlement.
- May save money. The legal costs of negotiating and preparing a nuptial agreement are usually less than the legal costs of negotiating or going to court over a divorce settlement.
- Protection of assets. You can protect assets that you may wish to “ringfence” from one another, such as inherited assets, an interest in a family business, gifts received from a third party or property acquired before the marriage. If the nuptial agreement ringfences such property, the court is less likely to award a share of that property to your partner on any future divorce.
- Debt protection. If one of you has significant debts, either now or in the future, the nuptial agreement can be used to protect the other's assets from being used to settle those debts.
- Compensation for loss of career. You can agree that if, during the marriage, one of you gives up a potentially lucrative career to care for the family, that person should receive a larger share of the assets to reflect their loss of earning power going forward. It is often difficult to convince the court to award an element of “compensation” for loss of career, but provision for compensation in a nuptial agreement is likely to be upheld by the court.
- Protection for family members. If you have children from a previous relationship or marriage, a nuptial agreement can ensure that certain assets are ringfenced for them.
- Minimises acrimony on divorce. As the nuptial agreement sets out how to share assets on divorce from the outset, this should lead to fewer arguments over the settlement and make it less acrimonious should you go on to divorce.
- Improves communication. Discussing financial issues can be one of the most difficult aspects of marriage. Dealing with this at the outset of the marriage can strengthen a relationship and support good communication in the marriage.
- Protection of business partners. If you have an interest in a family or small private business, a nuptial agreement can protect that interest and prevent disruption to the business if the marriage breaks down. This could prevent a situation where your partner is awarded an interest in the business and has to participate in its running with family members or business partners.
- Provision on death. A nuptial agreement can set out what should happen to your assets on your death. This can support the provision contained in your will and clarify what should happen to certain assets. For example, by protecting your children's and grandchildren's inheritance.
- Freedom to agree your own terms. You may have a creative plan for dividing your assets if you divorce. A nuptial agreement gives you the freedom to agree your own terms without the court imposing a solution on you.
- Marrying for money concerns. If you are concerned that your partner may be marrying you because of your wealth, your partner committing themselves to a nuptial agreement that leaves each of you with a fair and reasonable settlement may ease your mind.
Disadvantages
- Not legally binding. Nuptial agreements are not yet legally binding in England and Wales so a court may still make an order in different terms to your agreement. However, if the nuptial agreement has been properly entered into, it is likely to be upheld.
- Cost. You could spend considerable time, money and effort negotiating the terms of the nuptial agreement, but find it is not upheld by the court in any future divorce proceedings, although this will only happen if the court finds the agreement “unfair”.
- Difficulties in making financial provision for children. A court's first consideration in deciding a financial settlement that involves children is the children. Children's circumstances change so, what you agreed when you first drew up the agreement may not always provide a fair settlement as the children's needs evolve. Including a review clause in the agreement may help overcome this. Also, the Child Maintenance Service (CMS) has ultimate jurisdiction over child maintenance claims, so any provision on the nuptial agreement for child maintenance may be overruled by the CMS.
- Clauses providing for which legal jurisdiction deals with the divorce are not effective. You can provide which country's law should apply to the agreement if your marriage breaks down but not all countries will accept or be bound by your choice.
- Circumstances can change which may mean that the agreement will lose its relevance and is unlikely to be upheld by the court. A review clause may help to avoid this.
- Needs to be kept under review if there is any significant change to your circumstances or after a given number of years (usually at least every 3-5 years).
- Unromantic. You and your partner may find the concept of a pre-nuptial agreement setting out what will happen to your finances should your relationship fail rather unromantic at a time when you are in love and planning your wedding.
- Adds to the pressure. Preparing for a marriage is stressful and the added pressure of considering financial issues and negotiating the terms of a pre-nuptial agreement can put strain on a relationship.
- Vulnerability of the economically weaker party. Sometimes the economically weaker party wants to agree to clauses limiting their rights simply to get the pre-nuptial agreement finished so they can concentrate on the wedding.
- Can cause family upset. This can put strain on family relationships.
- Parental influence means a pre-nuptial agreement can end up reflecting the parents' wishes rather than those of the couple. This must not happen and can amount to duress which would invalidate the agreement.
- If it is used to waive inheritance issues. This can leave one of you in a precarious financial position when the other dies which would invalidate the agreement.
- Legal fees of preparing the agreement are lost if the marriage survives.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.