Up until 2010, pre and post-nuptial agreements were not recognised as being enforceable under UK law; however, they are now becoming increasingly common. Partner and Head of Sweeney Miller Law's Family Team, Rebecca Cresswell, explores their benefits for businesses.
What are Pre and Post-nuptial Agreements?
Pre- and post-nuptial agreements are contracts entered into by marrying couples or those entering into a civil partnership which details what happens to their assets including business interests and investments, together with arrangements for any children in the relationship should it break down. Hopefully, they may never be needed, but if they are, then it is important that both sides get independent, expert advice to ensure that they each achieve the best outcome.
If such an agreement is in place and the couple split, the Court should take it into account where the parties have entered into it freely, with full appreciation of its implications, unless holding the parties to its terms would be unfair. The question is also whether there was full financial disclosure to one another and whether they obtained independent legal advice before signing the agreement.
The rise of the ‘Prenup’
Whilst many people understandably regard pre- or post-nuptial agreements as unromantic, Sweeney Miller Law’s family team is seeing an increasing number of couples choosing to enter into them for a wide range of different but very sensible reasons. One significant factor is that couples are now marrying or entering civil partnerships later in life, many waiting until their 30s when they have already worked for many years and have independently built up their own assets such as buying a home, growing a business and made pension contributions. In addition, they may already have children from a previous relationship to whom they wish to leave their assets upon death.
This shift away from the traditional route to marriage has also prompted couples to take a more pragmatic and practical mindset when considering things like – should they own their home jointly; should they share a bank account; should their business be kept separate from the marriage; how will any pensions be dealt with; and what if one spouse contributes more financially than the other?
Business is business!
Sweeney Miller Law works with both individual and commercial clients, and sometimes these areas crossover. Couples who either individually or jointly own businesses find that a pre- or post-nuptial agreement is helpful as it gives them the opportunity to discuss the wider implications if the relationship breaks down; they can rationally negotiate a settlement relating to any pre-marital assets if they were to separate in the future.
No matter how unlikely a divorce seems, it is vital that business owners consider the financial implications of marriage or a civil partnership, as the Court will consider all the assets and liabilities between the parties to calculate an appropriate financial settlement. This includes any business, income, assets, and shares.
Generally, matrimonial property is likely to be shared equally and non-matrimonial property is expected to be retained by the person who owned it before the marriage; however, if there is a need to share assets, the business can still be shared. This is particularly relevant if a business has grown significantly during the marriage and the spouse has played a part in the business, or it has been mingled with matrimonial assets.
The Court is often reluctant to separate a business as part of a divorce settlement, especially if the other spouse can be compensated in other ways, such as a lump sum payment or a larger share of equity from a property sale. However, business owners should not be fooled into thinking their shares are safe from divorce; the Court can order a transfer of shares to the other spouse to make up for any unequal settlement division.
Pre- or post-nuptial agreements are therefore becoming more popular for couples where businesses are involved as they play an essential role in wealth protection and in turn certainty for the future.
You and your business’ future
With Sweeney Miller’s breadth of experience across family and commercial matters, the firm works inter-departmentally to draft shareholders and partnership agreements and other necessary commercial contracts that come into play when there is a business interest in the marriage or civil partnership.
To avoid costly wrangling later down the line, family businesses may find it useful to include a provision in their shareholders’ agreement and articles of association requiring all parties to enter into a pre- or post-nuptial agreement to protect shareholders’ positions before any marriage or civil partnership. Sweeney Miller’s collaborative, inter-departmental approach ensures that clients are protected in the future, helping to avoid a sale or transfer of shares and in turn protect the shares from being seen as marital.
Hope for the best but plan for the worst
People who do not enter into a pre- or post-nuptial agreement often enter into marriage or civil partnership blindly, not knowing the financial implications of such a commitment. Commenting on the value of pre- and post-nuptial agreements Rebecca said:
“We all look forward to the beautiful romantic ceremony, but after the confetti has settled and if the relationship sadly breaks down, it is often not so beautiful to find out all of your assets have been shared with your spouse.
Not understanding – or planning for – this possibility from the outset can create a risk of financial hardship and retirement poverty later in life. Whilst we all hope for the best, it is crucial to plan for the worst by getting expert advice and ensuring certainty in times of uncertainty”.
Expert team
The Sweeney Miller Law Family team works closely with colleagues in our busy company, commercial and estate planning teams so we can advise couples on the whole range of considerations when entering a marriage or civil partnership with business assets or significant financial wealth. Our pragmatic, partner-led approach and commercial understanding provide comfort in the knowledge that your pre- or post-nuptial agreement is tailored, fair, and appropriate for your circumstances.
To find out more, book an appointment by emailing Rebecca Cresswell at rebecca@sweeneymiller.co.uk, calling 0345 900 5401 or visit www.sweeneymiller.co.uk