What Are The Alternatives To A Prenup To Protect My Finances (UK)?

Entering into a prenup is often considered as being not very romantic, and against the optimistic spirit of getting married and embarking on a shared life. Not only that, but some individuals also feel it introduces a strong element of mistrust into a relationship. All of which can lead to some couples deciding to forego the protections of a prenuptial agreement. But whatever the reason for the reluctance to enter into a prenup, there are alternatives that may protect finances. This article discusses the options.

Generally, people create trusts for a variety of different reasons. These can include:

  • Having children from a previous marriage and protecting/ringfencing assets for their benefit. The children can be named beneficiaries which means that all named assets will be transferred over to them in the event of the doner’s death
  • For accumulated substantial wealth and assets pre-marriage
  • For parties getting married in later life who wish to protect previously accumulated assets and property
  • If you own a business
  • Have received a substantial inheritance

Because the trust owns the assets, they cannot be included in the matrimonial pot in the event of a divorce. However, even though you are not considered to be the owner of the trust, your interest must still be disclosed on divorce. The court will make a decision as to whether an interest in the trust will be taken into account in the divorce based on the following questions:

  • Is the trust a financial resource? Upon divorce, the court can consider all financial resources available to a couple to achieve the fairest outcome. This means the court may look past the complex structure of the trust to examine the reality of what assets are actually there.
  • Is the trust a sham? A sham trust is considered by the court to be an attempt to pretend that an arrangement is a trust. If it finds a sham trust is present, it will be disregarded and added back into the matrimonial pot for consideration.
  • Is the trust a nuptial trust? These are also called “nuptial settlements” and are when the husband and wife are beneficiaries connected to the trust in their capacity as spouses.

Keeping finances separate

If you have a bank account or accumulated funds before marrying and want to keep them separate, it makes sense to keep it apart from the other party. If the money is merged, it becomes matrimonial property, which can be shared during the divorce process.

Protecting a business

If you don’t have a prenuptial agreement, and you own your own business, it is important to obtain a valuation before you get married. This way, you will have a record of the value of your business before appreciation so that the value of it during the divorce is protected. The more records you retain regarding non-matrimonial assets, whether or not they relate to your business, will ensure you are in a better position when it comes to divorce.

Post nuptial agreement

A post nuptial agreement is made after marrying. This is very much like a prenuptial agreement in the things it covers and the overall look, and is a contract between spouses which sets out how assets and property will be split on divorce. It can also include arrangements for the children and maintenance.

As with prenups, post nuptial agreements are not legally binding in the UK. That said, if you take similar steps to ensure both parties fully understand the implications of the contract and have not signed it whilst under duress, the agreement will hold much more weight in court.

Ringfencing pre marriage or post marriage assets

If you have non-matrimonial assets you wish to protect, you will need to ringfence them throughout your entire marriage. There is protection available for non-matrimonial assets, but this is weakened if they have been used to financially support you or your spouse during the marriage. This can included money withdrawn from a trust or that has been acquired from additional properties you own.

In addition, you should also be cautious of using money from assets acquired following separation to support your ex-spouse prior to the divorce settlement being finalised. As with pre-marriage assets, this could give them some rights to those assets.

Don’t get married(!?)

Very different and complex rules apply to couples who live together without getting married. The court will look at the intention of the parties regarding the assets. So if there is nothing in writing, and no clear evidence of discussions or promises made, the court will consider the circumstances and see whether an agreement can be implied. If not, then the assets belonging to each party, will stay with that party and will not be divided on separation.

It is possible to enter into a living together, or cohabitation agreement. This works in a similar way to a prenuptial agreement; however, the law relating to unmarried separating couples is very different to that of divorcing couples. Generally, unmarried separating couples will leave a relationship with belongings in their sole name, only jointly owned property is capable of being shared.

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