Marriage and the protection of family wealth

Planning a wedding is a time filled with joy and excitement. However, it can also bring some uncertainty and apprehension for some (not limited to the couple). This apprehension can often surround finances.

A large proportion of weddings in England are those choosing to marry for the second or third time. Pre-nuptial agreements used to be regarded as limited to the rich and famous. Times have changed and people now recognise them to be an effective method of protecting family wealth.

Pre-nuptial agreements are being increasingly used, effectively, to protect the inheritance of children from first marriages. If a second marriage were to fail, such inheritance would be at risk if a divorce were to take place because the starting point would be a 50:50 split of all assets.

The more traditional use is to ring-fence assets acquired before a marriage. This could be in the form of inheritance or personally acquired wealth, often when there is a significant difference in income or capital positions of the couple.

In the past, people have referred to such documents as ‘unromantic.’ There has been a significant move away from such terms of reference with people acknowledging the benefits to communication of such documents. The documents require the couple to be open and honest with one another. They look to provide clarity and certainty. This can only be achieved with an open dialogue. Some report that communication has been improved by having discussions about money before marriage. This reduces the chances of acrimony later, should the marriage not be successful, as they allow the couple to think ‘outside the box’ and have the freedom to agree terms that work for their particular circumstances.

The purpose of the agreement is to provide certainty and clarity for the couple. Although they are not legally binding at the moment, it is expected that the law will change. In the interim, the court must take such documents into account on divorce. If properly drafted, the court can, and is, persuaded to follow them in the event of divorce if certain criteria have been met. For example, both have received independent legal advice and the document has been signed at least 28 days before the wedding, a ‘cooling off period.’ It is therefore essential to obtain advice at an early stage.

If a couple is not getting married but moving in together then they may wish to receive advice on a cohabitation agreement. The principle is similar to a pre-nuptial agreement. It lays out expectations and provides more certainty around what should happen from a financial perspective in the event of the relationship breaking down. Often these are prepared in conjunction with a Declaration of Trust.

If you would like to discuss your options on how to protect your family wealth, please contact me.

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.