Why are more families turning to pre-nuptial agreements? A legal perspective

This week, we sit down with guest contributor Oliver Guest, Senior Associate at Withers LLP, to examine why pre-nuptial agreements are increasingly recognised as a useful tool for safeguarding family wealth and ensuring financial clarity. With extensive experience advising high-net-worth families on all areas of family law, Oliver shares practical insights on the benefits of “pre-nups” and how they can help navigate the unexpected challenges that many families face.

Why do people consider pre-nuptial agreements, especially in the context of wealth management?

Oliver: No-one enters a marriage expecting it to end in divorce. However, when it does occur, divorce is often regarded as one of life’s most challenging and emotionally taxing experiences. Pre-nuptial agreements can significantly reduce this stress. Not just for the separating couple but for their wider families.

For those who have worked hard to create and preserve wealth, safeguarding these assets for family and future generations is often a priority. Pre-nuptial agreements can significantly reduce the emotional and financial stress of a divorce, while helping to protect those assets from being divided in ways that may feel unfair.

What are the key benefits of a well-crafted pre-nuptial agreement?

Oliver: When done properly, a well-structured pre-nuptial agreement offers clarity and peace of mind. Above all, they can:

• provide clarity about the financial 'rules' for a separation, thus saving significant time and cost (both emotional and financial) when a marriage is ending;
• protect non-matrimonial assets, especially inheritance or family wealth, from the outset. This may be particularly important for parents or grandparents or wider family members who want to ensure family assets remain secured for direct descendants;
• allow both parties to enter the marriage with a clear understanding of financial expectations, reducing possible future anxieties or conflict;
• offer an opportunity for prudent financial planning. Many families devote time to creating a Will; overseeing their investments and pensions; or monitoring inheritance tax policies that may affect their financial planning. Pre-nuptial agreements are quickly becoming essential for high-net-worth families with a keen focus on wealth planning;
• and finally – they can act as an insurance policy, limiting potential liability.

What can be included in a pre-nuptial agreement and how flexible are they?

Oliver: A pre-nuptial (or post-nuptial) agreement can range from highly detailed to more general arrangements, depending on individual needs.

For those seeking total clarity, agreements can specify exactly how assets and liabilities will be divided should a marriage end after a set number of years or depending on certain circumstances such as the number of children.

Alternatively, some chose pre-nuptial agreements that are less specific (and require fewer tough conversations) but still state, for example, that a divorce settlement would definitely not include a particular asset; or that maintenance payments to a spouse would be limited to a certain quantum or duration.

Regardless of the route taken, I find that ‘pre-nups’ do encourage families to undertake an assessment of how best to manage their assets before and during marriages, sparking discussions, often with the support of their investment manager, on how best to plan for the future. As such, a pre-nup can offer an important tool within many families’ overall wealth planning.

Are pre-nuptial agreements legally binding in England, and what considerations should clients be aware of?

Oliver: In England, pre-nuptial agreements are not binding, but if done properly they are highly persuasive and the courts are known to be respectful of them.

But a word of warning: they do need to tick certain boxes. Each party should receive independent legal advice; neither should be pressured into signing (for instance, signing moments before you walk down the aisle); the agreement must be deemed fair, which typically means each person retains sufficient resources to rehouse appropriately and to have their income needs met in the event of divorce; and there must be sufficient financial disclosure for each party to know what they are signing up to, or waiving a potential claim against. Failure to meet these conditions can invalidate the agreement, as recent cases have shown.

One such case that made the headlines was that of Helliwell v Entwistle where the Court of Appeal concluded the wife had committed fraudulent non-disclosure (failing to disclose c.£48m of assets) resulting in the pre-nuptial agreement being set aside.¹

Is discussing a pre-nuptial agreement at the time of engagement typical or helpful?

Oliver: Although suggesting a pre-nuptial agreement whilst celebrating, or shortly after, an engagement may not be the most romantic concept, it can prove invaluable and could save considerable strain in the future should the unexpected occur. Having such conversations early on can help avoid misunderstandings and safeguard interests for the benefit of everyone involved.

Every family’s circumstances are unique and by engaging with professional legal and financial advisors, you can protect your beneficiaries and ensure that your wealth is protected and distributed according to your wishes.

[1] Entwistle (Respondent) v Helliwell (Appellant) - UK Supreme Court

About the author

Oliver Guest Senior Associate, Withers LLP

Oliver is an associate in the divorce and family team of Withers LLP, advising in all aspects of family law.