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Home / News and Insights / Insights / Family offices and pre-nuptial agreements

This article was also published in GFOC Journal.

Pre-nuptial agreements provide an essential layer of protection for people who have family wealth, inherited assets, or business interests that have been established prior to the marriage. With family offices being so closely involved in managing a family’s affairs and wealth, it is not uncommon for a family office to guide family members who are embarking on marriage on the risks of family wealth leaving the family on a potential divorce and that this can be minimised by a pre-nuptial agreement.

Often, those considering a nuptial agreement will have assets outside of the jurisdiction. The laws governing division of assets upon separation and the treatment of nuptial agreements vary vastly from country to country. Specialist advice should be sought if other jurisdictions could be a potential domicile or future family residence. Depending on the circumstances, it may be advisable to include provision that the English courts will have exclusive jurisdiction in the event of divorce.

The English family court system does not have a separate property regime for married couples, unlike other countries in continental Europe. Whilst judges routinely refer to ‘marital’ and ‘non-marital’ property, the starting point is that all assets are reviewed as within the matrimonial pot before the Court hears arguments as to the nature and / or provenance. There is no strict distinction between marital assets and excluded wealth. This also means that any inherited, gifted, and pre-acquired wealth could be taken into account. A nuptial agreement is the best route to steering the court towards the need for a distinction. There still has to be a fair consideration of the parties’ needs, however, the court will review the delineation between assets developed during the marriage and those that should be treated differently. Bearing in mind that on divorce, the court can exercise a wide range of discretionary powers to divide wealth including property orders, capital payments, pension sharing, and the payment of maintenance (often called ‘alimony’ by other jurisdictions).

Nuptial agreements are not yet enforceable as contracts and can only persuade not override the jurisdiction of the court. Significant weight can be attached to their terms and the recent case law continues to trend towards their recognition. The Law Commission has been reviewing whether nuptial agreements should become, subject to key criterion, a determinative factor under the legislation that applies when separating the finances of married couples.

Set out below is a summary of that criterion considered by the Law Commission. It is these points that must be considered to provide the nuptial agreement with the fullest weight both now and in the future.

  1. Both parties must enter into it of their own free will, without undue influence or pressure.
  2. Both parties must be aware of its implications and have taken independent legal advice.
  3. There must be a level of disclosure to ensure that each party is signing to say they had all the information material to his or her decision making process and to understand the financial consequences of the marriage coming to an end.
  4. The agreement must show how each parties’ needs are to be met and that a level of fairness, not necessarily akin to equality, has been considered and set out.
  5. For a pre-nuptial agreement this should be completed no later than 28 days before the wedding date and thus it is best practice to seek legal advice at least 3 months prior to the big occasion.

We find that often wealth advisors, accountants, and / or investment managers are best placed to speak to a party in the first instance regarding the necessity of obtaining a nuptial agreement if a marriage for that party or, for example, their child becomes imminent. Parents considering generational wealth and estate planning decisions should also be alive to the risks of a child divorcing without the protection of a nuptial agreement. This is particularly crucial for high net worth and ultra-high net worth families.

A pre-nuptial agreement should be treated, as people do with their wills and LPAs, as a live document that is to be adhered to carefully but also reviewed at various key life stages such as the arrival of children, a new business endeavour or, in particular, an international relocation.

The BDB Pitmans family team have extensive experience of dealing with and being regularly instructed by UK and overseas individuals especially in relation to nuptial agreements. We work with family offices to give client’s a bespoke service and have extensive experience advising family offices and their family members on the merits and pitfalls of nuptial agreements.

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