Will pre-nuptial agreements take the financial pain out of divorce?


Date: 27 February 2014

Will pre-nuptial agreements finally take the financial pain out of divorce?{{}}You might have read the rather sad statistic that 42% of marriages in England and Wales end in divorce. This in spite of the fact that most couples, we assume, enter into marriage full of optimism for a happy-ever-afterwards.

But are we finally outgrowing the fairytale as we increasingly marry later in life, or enter into second marriages, with assets, property, businesses and children as part of the package?

The cost of divorce can feel like another sting at an already stressful time. Legal aid has been withdrawn for divorce and separation cases other than in exceptional circumstances (eg domestic abuse or forced marriages). Couples are now being heavily encouraged to use the cheaper and more collaborative option of mediation to sort out the basics of dividing assets and agreeing on shared parenting arrangements and child support. But in a complicated financial situation with large assets or business interests, resolving everything together with the help of a mediator may be a step too far.

This is where pre-nuptial agreements could turn out to be a worthwhile investment, drawn up at the outset of a marriage when both parties are warmly disposed towards each other and more likely to agree on what is ‘fair’. Predictions currently are that only those with substantial assets would want to take advantage of this new law, if passed, but once we’ve lost our collective aversion to the unromantic view of ‘pre-nups’ we could see a much greater uptake.

Small business owners, in particular, might want to protect their company from any subsequent division. After years of investing time, energy and money into a business prior to marriage, keeping it intact and protecting a future livelihood could save time, money and heartache later in the courts if things do eventually go wrong.

The Law Commission says that currently "There is evidence of regional inconsistencies in how the courts approach awards for needs which creates unpredictability. And while the law is largely well-understood by family lawyers, it is not clear to the general public who are increasingly dealing with the consequences of marital breakdown without legal assistance."

Its proposal includes the need for both parties to have had legal advice before being able to sign a binding pre-nuptial agreement so this isn’t a move to keep lawyers out of the process but rather to bring them in at the outset.

It will be interesting to see how many law firms start promoting pre-nuptial advice if this proposal becomes law, and whether the uptake will encourage the sort of initial ‘fixed-fee’ consultations which are currently offered by many firms to individuals considering divorce.

Who knows? In the end, an agreement made prior to marriage may lead to less bitterness and fall-out in the aftermath of marital breakdown. Happy-ever-after, perhaps, just not together.

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