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14 March 2019
Step one – discuss possibility of a nuptial agreement
Step two – each party engages solicitors and agrees headline terms
Step three – disclose assets and liabilities
Step four – draft and negotiate agreements
Step five – sign the agreement and put it somewhere safe
The practical process of entering into a nuptial agreement may not be as difficult as it first seems. This article provides a five-step guide in that regard.(1)
Some people choose to see a solicitor to learn more information about nuptial agreements and the process of obtaining one before they raise the subject with their partner. Others prefer to float the idea with their other half first, to gauge their reaction. For some, this can be a daunting task. Clients find it helpful to reference some of the benefits of nuptial agreements, including that:
Once the idea of a nuptial agreement has been floated, it is a good idea to discuss a broad outline as to what it will cover in order to ensure that both parties are on the same page and there are no surprises down the line.
It is important that both parties have independent legal advice. Therefore, each party should engage their own solicitor. At an initial meeting, both parties' solicitors will explain:
Typically, a nuptial agreement is drafted so that certain assets are excluded from the division that happens on divorce, commonly defined as 'separate property'. For example, one party may want to exclude pre-existing wealth that they bring into the marriage. Parties may also want to exclude the sharing of broader categories of wealth that arise during the marriage, such as gifts and inheritance.
Marital assets (ie, those owned or acquired jointly) will be treated differently and be open to sharing. These kinds of arrangement will usually be flexible. For example, if one person has defined needs on divorce that can only be met if some of the separate property is also required to meet needs, those needs can be defined and this can occur (but only insofar as it is necessary).
Another method is the 'tariff approach', which entails making specific financial provisions using a system where one person receives, on divorce, a lump sum and/or maintenance linked to the length of the marriage. Such provisions would probably be capped if the marriage exceeded a certain duration.
Whatever the approach, an agreement would also normally contain provisions as to how jointly owned property is to be dealt with on divorce and how marital finances will operate. Specialist legal advice is vital to ensure that a bespoke document is drawn up which meets the parties' objectives. In the event of divorce, any agreement must satisfy the court that its terms are objectively fair.
It is important that both parties set out an accurate picture of their financial positions so that they enter into negotiating the agreement with their eyes open. Both will need to disclose accurately in writing their individual assets and liabilities. Some may feel apprehensive about this at first, particularly if there is family money involved, but it is a good opportunity to have a frank discussion about each other's finances. If either party fails to fully disclose their financial position, it could seriously undermine an agreement.
Normally the person who initiates the idea of a nuptial agreement will ask their solicitor to prepare the first draft. Once that person is happy with it, it would then be sent to their fiancé/fiancée or spouse to discuss with their solicitor before proposing any amendments that they feel may be necessary. This process should ideally start at least three to four months before the wedding so that there is enough time for negotiations to take place without either party feeling under pressure.
A nuptial agreement should be as flexible as possible to take account of any significant life changes. In some cases, couples will include clauses which require the nuptial agreement to be reviewed if a certain life event takes place. This could be after having children, moving abroad or simply after a specified period. Other parties may choose to review the document in the event that their financial circumstances change markedly from the point at which they first signed the agreement.
Once the terms of a nuptial agreement have been agreed, the document must be signed. The parties can sign the agreement remotely or may choose to sign it together at a solicitor's office. The only requirement is that the signing of the agreement is witnessed.
It is then common for one of the parties' solicitors to hold on to the original and provide certified copies to the other parties. Unless provisions are made to review a nuptial agreement or circumstances have changed significantly, there should be no requirement to revisit the document again. The document should be kept somewhere safe to provide greater clarity over a couple's future in the (hopefully unlikely) event of divorce.
For further information on this topic please contact Joanne Edwards or Rosie Schumm at Forsters LLP by telephone (+44 20 7863 8333) or email (email@example.com or firstname.lastname@example.org). The Forsters LLP website can be accessed at www.forsters.co.uk.
The materials contained on this website are for general information purposes only and are subject to the disclaimer.
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