Recent statistics confirm that 82% of people have not yet made lasting powers of attorney (LPA). ...
Wealth in relationships
In recent years it has become increasingly common for lawyers to be consulted when a relationship is in its formative stages. Mel Loxley examines prenuptial and cohabitation agreements.
Although other jurisdictions have recognised prenuptial agreements for many years, the courts of England and Wales have historically frowned upon the parties to a marriage attempting to govern their claims contractually, even saying that such agreements were contrary to public policy!
This paternalistic stance has, however, softened over the years and in a landmark case (Radmacher v Granatino 2010) the court’s position on prenuptial agreements underwent something of a transformation. The outcome of this case was that if such an agreement had been entered into freely, with a full understanding of its implications, with knowledge of the other person’s financial circumstances and with the benefit of legal advice, the court would uphold that agreement unless it was unfair to do so.
At the moment, prenuptial agreements are still not legally binding in the UK. By this I mean that the court still has the power to determine a couple’s financial claims against one another on divorce. But as the above case shows, provided certain conditions are met when the agreement is entered into, there is a very good chance that the terms of that agreement will be followed by the divorce court. At best, that agreement will be conclusive of those claims. At worst, the court will take into account the terms of the agreement and vary these where necessary to ensure a fair outcome.
Today, the court is recognising that couples should have autonomy and the freedom to determine their own fate.
The alternative? Without a prenuptial agreement those claims are left entirely at the discretion of the judge hearing your case. Whilst there is a statutory checklist of factors that guide the court in this exercise, the outcome can vary widely and, other than in short marriages, the court is likely to view the starting point as a 50/50 split of assets. When put in this way, not having a prenuptial agreement could be seen as quite a gamble!
Statistics tell us that couples marry later and that remarriage is on the rise. As a result, people have accumulated more wealth by the time they marry and therefore have more to lose should that marriage fail. Safeguarding wealth to ensure it remains yours or passes to your children from a previous marriage or relationship is not unromantic – it is sensible.
Cohabitation is the most rapidly growing family type in the UK today. It is just as important to protect wealth in this situation as it is in a marriage. A cohabitation agreement can set out how the couple will resolve any financial issues that might arise upon their separation and could save them costly litigation in the future. Further, the couple can enter into a Declaration of Trust if they are to own any property jointly, which will usually be conclusive evidence of their respective interests in the home they share.
If you have plans to cohabit or to marry but have not taken the opportunity to safeguard the wealth that you are bringing into that relationship, contact Mel on 01206 217384 or email email@example.com.