Protection from lockdown losses
Research has shown that some parents have decided to delay family inheritance planning in case their children’s marriages end in divorce due to the pressures of COVID-19 lockdown.
Many parents are worried that their children’s marriages will not last because of lockdown and have taken steps to prevent wealth and assets, usually given early, from being stripped from the family estate in the event of a divorce.
Lindsey Canning, head of Family Law at Wake Smith Solicitors, discusses options and looks at post marital agreements for clarity on asset division.
“Couples should consider entering into a post marital agreement as to the division of their assets, which would include not touching the inheritance, should they separate sometime in the future.
“This allows the parents to then gift the money or leave it in a Will. This is not fail safe but a better option than nothing.”
In the simplest of terms, a post marital, or post nuptial agreement is a legal contract between a married couple which outlines the division of assets, incomes and liabilities should a marriage end.
Lindsey added: “Most people are already familiar with prenuptial agreements or prenups. When they were introduced they were mainly for the rich and famous but they have become fairly common ahead of marriage for high net worth individuals.
“Postnuptial agreements, or postnups, are essentially the same, but they are agreed after the marriage ceremony or civil partnership has taken place.
“Both prenups and postnups are a contract, entered into by a couple, setting out how the assets of each party, such as property, savings and pensions and, also their incomes should be distributed in the event of a divorce, or dissolution of civil partnership.
“They aim to keep assets separate rather than allowing them to become mixed up within the marriage and hope to minimise the possibility of divorce-related financial disputes ending up in court.”
Currently postnups are not legally binding in the UK with courts not forced to follow the terms contained in postnups or prenups so, a Judge can determine that assets have been added to the matrimonial pot and how these should be divided, notwithstanding the terms of any postnuptial agreement.
Even though the family court is not bound by postnups they can be persuasive however, there are a number of safeguards that must be put in place and, postnups are more likely to be considered by the family court if they are fair and provide appropriately for the parties’ and children’s needs for housing and income.
Lindsey added: “The postnup must be properly prepared and, each party should take independent legal advice before entering into a postnup and they should not feel under pressure.
“Both should understand the full extent of any financial claims they might be giving up by signing a postnup – and each should provide the other with full disclosure of their financial circumstances.”
What elements can be included in a postnuptial agreement?
Matrimonial home – who will be entitled to remain, or should the property be sold?
Property portfolios and inheritances – expectations of and inheritances, gifts or property owned such as second homes before marriage.
Maintenance – if one partner is in a stronger financial position, they may agree to support the other party, how much will be paid?
Savings, shares and pensions – how will these be divided?
Business assets – particularly important if one party already has significant business interests before marriage.
Insurance coverage including, life medical and disability.
Debts and payment of any outstanding debts.
How will personally and jointly owned belongings be shared?
Lindsey added: “Both parties must first obtain independent legal advice as this removes the argument, at a later date, that one party was put under undue pressure or they didn’t realise what they were signing.
“Having professional legal advice can also provide you with information on circumstances which you may not have already considered and, necessary guidance on what the family court is likely to feel is fair.
“We would recommend that you spend some time considering the terms of the agreement and try and make them as precise as possible.
“Give serious consideration to any likely changes in your circumstances during the marriage. For example if you are planning on having children, or if you are likely to inherit or indeed retire with a healthy pension.
“Post nuptial agreements can be changed with both party’s consent so it is good practice to review your agreement every so often to make sure that it still meets your requirement and wishes.”
For further information on post nuptial agreements and estate planning contact Wake Smith Solicitors on 0114 266 6660.