Before a couple are married, they can enter into a contract that identifies how they will deal with their financal affairs, once they are married and if they subsequently divorce. You may have heard that such a contract or agreement might not be binding in law. The attitude of the courts are changing and they are more open to upholding an agreement than in the past.
Do you need one?
It is important to give consideration to this question well before the wedding. There are a number of things to consider, such as do one or both of you already own assets that you wish to be recorded as remaining a solely owned asset after marriage. It is essential that you provide to each other details of your financial affairs so that you can understand the advantages and disadvantages of taking this step.
Take independent legal advice
Each party to a proposed marriage should have independent advice before entering such an agreement. The courts in some countries regard pre-nuptial agreements as binding. While this is not the situation in England and Wales, the court will look very carefully at both the circumstances in which the agreement was made and the contents of the agreement to do justice to the situation should the marriage break down in the future.
Protect your future as far as possible
If a marriage is of short duration and a pre-nuptial agreement has been made with all the recommended formalities complied with namely independent advice, financial disclosure, provision for periodic review, an agreement is more likely to be upheld than not. This is less likely the longer the parties are married, partly because their financial positions are likely to become altered. In the event that children are born within a marriage, a pre-nuptial agreement is unlikely to be able to provide for what financial responsibilities will follow because there are so many uncertainties and changes that occur to careers and the need to bring up children that cannot be predicted.
A pre-nuptial agreement can help avoid a lengthy and costly financial dispute arising over the division of the parties assets on separation. Since the courts have a wide discretion under Section 25 of the Matrimonial Causes Act 1973 to have regard to many considerations, duration of marriage only being one, a carefully planned pre-nuptial agreement can stand both parties in good stead.
If you are in doubt whether a pre-nuptial agreement would be of assistance to you, it can be well worth an exploratory meeting. It is regarded by some as an unromantic beginning to a marriage but the intention is to find a respectful balance for two people that are joining forces. It can therefore have the effect of improving the understanding and relationship for the couple’s future.
What is a cohabitation agreement?
Some couples have no intention or plans to marry, but the legal basis for their relationship can be strengthened by entering into a cohabitation agreement. Like a pre-nuptial agreement it can identify whether assets will be owned separately or together. It can also define how much each will pay towards joint expenses and what will happen if the cohabitation comes to an end.
Where there is just one asset being a property where the couple will live, they are recommended to enter into an agreement called a declaration of trust. This type of agreement is specific to the property interests. It identifies who has paid what into the property and what they will get out when the property is sold.