Why You Might Want a Pre-Nuptial Agreement
Talking to your soon-to-be partner about a pre-nuptial agreement can be difficult and awkward. Most people do not want to think about a relationship breakdown at the start of a, hopefully, lifelong commitment.
Although most couples think that they will be together forever, around 44% of marriages in the UK end in divorce. At the time of saying ‘I do’, it is hard to think of the impacts of any potential separation. However, a prenuptial agreement is vital to avoid financial conflicts later on, should the relationship breakdown.
A pre-nuptial agreement is a legal contract between the couple that sets out the division of pre-marital and marital assets should the relationship break down. Moreover, it allows each partner to ring-fence certain assets or business units from being thrown into the matrimonial pot. Usually, assets of high financial value are protected by signing the pre-nuptial agreement.
Most couples consider entering into a prenuptial agreement due to the following reasons:
Disparity in Wealth
Although anyone can draw up a prenuptial agreement, commonly, people consider getting it if they have assets to protect. If one party is wealthier than the other by virtue of having several valuable assets or higher earnings, a pre-nuptial agreement will allow them to protect this. Following a separation, if financial proceedings commence, assets are usually split evenly however there are occasions where one party may walk away with more than 50%. This agreement will help safeguard certain assets that they have worked hard to obtain.
In contrast, a financially vulnerable spouse can sign the prenuptial agreement to have financial security in the event of divorce.
Protection of Future Wealth
Besides the existing assets, it protects the wealth and assets that either party may acquire in the future. It could be a return on investments, business profit, inheritance, or a salary rise that you are expected to get in the future. If a prenuptial agreement is signed, it is likely that these assets would not be divided between the couple
Protecting a Business Unit
If either party owns a business, this significant asset will likely be shared between the partners in case of divorce. A prenuptial agreement can be put in place to protect the business and the future of the individuals associated with the business.
Inheritance
If either party has received an inheritance or is expected to gain inheritance when a family member dies, they may want to safeguard the amount of money or inherited assets by signing a prenuptial agreement. This will then keep inherited assets outside the marital pot and protect it from being divided equally during a divorce.
Possibility of International Divorce
International divorces can be legally complex, therefore, many individuals tend to draw up pre-nuptial agreements when marrying someone from another country. In the presence of a pre-nuptial agreement, a person may not be affected by the laws relating to sharing matrimonial assets in their spouse’s home country (provided that the agreement makes provision for this).
Final Thoughts
A person can sign a pre-nuptial agreement for a wide range of reasons, mainly to protect assets, estates, or special family heirlooms. Moreover, partners can choose to enter into this agreement if they do not want to pay for the debts of the other.
