The benefits of prenups (even if they are unromantic and life is unpredictable)

Whilst in the depths of wedding planning – whether that’s choosing your favourite cake flavour, finding the perfect first dance song or carefully navigating family politics when forming the table plans – throwing a discussion around finances into the mix might seem completely unromantic.

However, choosing to enter into a marriage with your partner will mean that you are not only legally bound together, but also financially. Couples can choose to keep control over how their finances are regulated during their marriage, and, if the worst did happen, decide how they would divide their assets and income on divorce. They can do so by forming a prenuptial agreement (or “prenup”) before they get married.

We have seen a societal and generational shift in the public opinion on prenups. Our recent YouGov survey, for example, found that 49% of 25–34-year-olds would be in favour of compulsory pre-nuptial agreements, compared to 26% of over 55s. The law has shifted too, strengthening the enforceability of pre-nups over time and making them harder to challenge.

So, what has caused this shift and what are the benefits of prenups?

Protecting pre-marital assets

Perhaps the biggest shift from one generation to the next is that couples tend to get married later. The average age at marriage has seen a significant increase in the last 50 years from 24-27 years old in 1970 to 35 – 38 years old in 2018. Inevitably this means that individuals are likely to have already established their careers and built up their own assets by the time they get married. The legal presumption that all assets of a marriage would be split equally, simply does not sit well for most nor reflect the reality of modern relationships. A prenup will clearly outline the financial position of both parties at the time of marriage and can “ring-fence” the assets that were brought into the marriage by one party or the other.

Without a prenup, it can still be argued that an asset is pre-marital and should therefore be excluded from the “matrimonial pot”, but this will be more complicated and expensive. The court’s approach is highly discretionary and fact specific. Without a prenup, a “pre-marital” asset could become “marital” based on a variety of factors, including the couple’s standard of living, housing and income needs or simply the length of the marriage.

Financial transparency

Unfortunately, films and TV shows perpetually misrepresent the reality of prenups. They typically depict an unhealthy relationship with a big power imbalance. The partner who proposes the prenup is too often portrayed as greedy, cold and deceptive, whilst the other partner is labelled a “gold-digger”.

The reality for our clients is very different. Our clients recognise the benefits of starting their marriage with open dialogue on their finances. During the process of forming a prenuptial agreement, both partners will disclose all of their assets, income and debts. This allows couples to better plan for their future and opens a conversation about how they will reach their short and long-term financial goals together.

Typically, in our society, open conversations about money don’t come naturally. However, in the long term this can help to avoid sticky situations where couples are on different pages as to their financial habits and expectations.

Business interests

For business owners, prenuptial agreements offer a particularly strong form of protection. An inherent consideration when owning and running a business is managing ongoing risk and protecting both what has already been built and the business’ future growth. In the corporate arena, business owners can protect their rights, shareholding and business asset and income position through shareholder agreements and resolutions, and the company articles of association.

Equally, business owners and their business partners may have considered what happens to their shareholding in the event of their death and created a will to protect their interest. But what happens to their shareholding in the event of a divorce?

If necessary, the court has the power to order the transfer or sale of shares owned by a party to the marriage. This is a big risk to businesses and the only real way to mitigate it is through a prenup which seeks to protect the individual’s shareholding. In fact, it’s becoming increasingly commonplace for stakeholders in a business to make nuptial agreements a requirement for their fellow shareholders to protect the future of the business.

Family inheritance and lifetime gifts

A long standing and well recognised benefit of prenups is their ability to protect an individual’s future inheritance prospects. Family members might be anxious that their testamentary intentions will not be fulfilled if their child or grandchild’s relationship breaks down and for lots of families, this is how a conversation around pre-nuptial agreements will start.

Prenups remain the best protection available against a potential loss of inheritance later down the line. They can set out (often long before any inheritance is due) that inheritance will form part of their “separate property”. The same goes for lifetime gifts, whether these given as part of the wider family’s estate planning or to help the couple purchase a property, for example. In fact, this is a key way that prenups can benefit a couple during their marriage.

Having a prenuptial agreement in place might offer the reassurance that parents or grandparents need to give financial assistance to the married couple, without worrying that it might become jeopardised in the future.

The future

There’s still a long way to go before prenups become commonplace in Britain, as they are in many other European countries. Prenups remain shrouded by misconceptions and often misrepresented as an agreement that can only ever benefit one person. In fact, a well-formed prenup will protect both parties to the agreement, making sure that there is sufficient provision to meet each person’s needs, and the needs of any children.

The law around prenups is also lagging behind other European countries. Under the current law, prenuptial agreements are not automatically legally binding. This is being considered by the Law Commission and a scoping paper is due to be published by September 2024 to revisit their recommendations and any future law reform.

Given the slow pace of reform, it’s unlikely that there will be any imminent significant changes. Nonetheless, even under the current legal framework, if a prenup is properly formed, the court will hold the parties to its terms. If you’re considering entering into a prenuptial agreement, therefore, it’s vital that you receive legal advice from a specialised family lawyer.

Our team of family lawyers are experienced in dealing with wealth protection and prenups. If you’d like to find out more about prenuptial agreements and tips on how to introduce them to your partner, listen to our Explaining family law podcast on Spotify or Apple Podcast. Alternatively, you can find out more about our team and how we can support you.

Editor’s note

All figures, unless otherwise stated, are from YouGov Plc.  Total sample size was 2004 adults, of which 809 are married in England and Wales. Fieldwork was undertaken between 19th - 22nd January 2024.  The survey was carried out online. The figures have been weighted and are representative of all GB adults (aged 18+).