With reports that divorce enquiries are up over 40 per cent during lockdown*, interest in protecting wealth through pre- and post-nuptial agreements is on the rise. We look at the potential benefits of these agreements and what you need to consider.
In the UK, the division of assets on divorce doesn't follow a set formula, with the family court taking a range of issues and circumstances into consideration. "That creates uncertainty," says Karina Challons, Managing Director, Wealth Planning Private Banking, "and perhaps accounts for the increasing importance placed on both pre- and post-nuptial agreements by high net worth families. Even though the agreements are not legally binding in the UK, they can still prove to be influential in court, providing all parties have been properly advised and the correct process has been followed."
Replacing emotion with rationality
That means, for example, ensuring that any pre-nuptial agreement is arranged and signed at least 28 days before the wedding is due to take place, so that no suggestion of it being signed under duress can be made. In practice, says Karina, the issue should be raised much earlier.
"Discussions around pre- and post-nuptial agreements should form part of a child's education as they enter their late teens. By making them financially aware of such agreements as part of their overall responsibility to protect the family wealth, they become something that's accepted as the family norm. It also helps to take the emotion out of the equation. Having this discussion with children before they bring a potential spouse home is far less personal."
"These shouldn't be viewed as one-time agreements that can sit quietly on a shelf – they must be reviewed to ensure they continue to offer the protection the family requires." Karina Challons, Managing Director, Private Bank Wealth Planning, HSBC
"Pre- and post-nuptial agreements can provide peace of mind and security." Karina Challons, Managing Director, Private Bank Wealth Planning, HSBC