When a famous couple gets married – or when they get divorced – it is not uncommon for celebrity news sites to refer to the existence of a prenuptial agreement or ‘prenup' as they are often known. However, with record numbers of marriages ending in divorce, it is no longer the case that such agreements are reserved for those with high levels of personal wealth. So what is a prenup and should you consider signing one?
Put simply, a prenup is a written agreement entered into by a couple before they get married that sets out how their finances will be dealt with, should they separate or divorce in the future. One way of thinking about a prenup is as an insurance policy – while no one expects to suffer an accident, we still take out insurance policies in respect of our cars, homes and other property just in case the worst happens. Prenups offer the same type of protection, giving you clarity and peace of mind regarding your finances if something unexpected does happen.
In many cases, prenups are used to extend protections already offered by the law when couples divorce. Legislation sets out what assets will go ‘into the pot' when it comes to dividing up assets. Generally speaking, these will be assets that have been acquired after the marriage while others, such as a house owned before the couple married, will not be considered property that should be shared on divorce.
However, some circumstances might mean an asset that was owned by one of the spouses before the marriage becomes shared property and, as a result, could be split on divorce. Using the example of a house again, if one of the parties bought a flat as an investment property before the marriage, this would not go into the pot when it comes to reaching a financial settlement. However, if they sold the flat during the marriage and invested the money in another flat, the new property could be considered matrimonial property and would be available for division if the marriage ended. A prenup is commonly used to ‘ring-fence' certain assets to ensure that they remain with one spouse if they divorce in the future.
The short answer is yes unless it can be shown that the prenup was unfair or unreasonable at the time it was entered into. While the law on prenups in England and Wales is not as clear, in Scotland there are provisions in the law that say financial agreements entered into by a couple will generally be legally binding. However, both parties must take legal advice before signing any such agreement.