GP3T0Y Elderly couple making their way to the church on their way to renew their marriage vows
© Alamy

The pre-nup has finally come of age. It used to be the preserve of the relatively young — an insurance policy to protect too much wealth from leaving the family in the event of a marriage breakdown.

Now, prenuptial agreements are becoming common for grandparents, too — ensuring that when someone marries late in life, their hard-earned wealth can be safeguarded for their children and grandchildren.

The number of people getting married aged 65 and over rose by 46 per cent in the decade to 2014, according to the latest Office for National Statistics marriage data. At the same time, the number of older divorcees is also increasing.

Known as “silver splitters”, some 92 per cent of brides and grooms aged 65 and over were divorcees, widows or widowers. During the decade to 2015, the number of divorced men aged over 65 increased by 23 per cent and women by 38 per cent.

At the same time, people are marrying later. The average age for first marriages is now well into the thirties, a time in life when both brides and grooms have had the opportunity to build up or perhaps inherit assets before they marry.

It is not surprising that solicitors are being asked to draw up more pre-nup agreements — but are they worth the money?

Sarah Balfour, a partner at law firm Irwin Mitchell who spoke at the Later Life Planning Conference in London last month, says she has seen a considerable increase in demand for pre-nups and occasionally for postnuptial agreements to assign assets after marriage.

“One of the largest areas concerns second- or third-generation wealth,” she says. “Grandparents ask their grandchildren to enter into a pre-nup. I’ve got at least two ongoing cases where the parents want to pass on family wealth that comes from their parents and they want their married children to enter into a post-nup. In one case, the couple will use part of the money to pay off their mortgage and the rest will stay with the wife.”

While pre-nup agreements carry legal weight, they are not backed by statutory force so are not certain to survive a divorce.

In 2010, a landmark ruling by the UK’s Supreme Court found a prenuptial agreement to be binding in the case of a German heiress.

Katrin Radmacher’s ex-husband, Nicolas Granatino, went to the Supreme Court after appeal judges slashed his divorce settlement from more than £5m to £1m.

The Supreme Court said it agreed that if the evidence was strong, pre-nup agreements could have decisive or compelling weight. The case was seen by lawyers as a test of whether pre-nup agreements were applicable in law in England and Wales. However, what might stand up in court is still very much a grey area.

“For a pre-nup to have any weight it needs to be fair and to have been entered into free from duress and unfair pressure,” says Ms Balfour. “If the weaker financial party is presented with a document in the week running up to a wedding — or even the night before — warning bells ring.”

In 2014, the Law Commission recommended making certain “qualifying” nuptial agreements binding. Legislation was never passed, but the recommendation was that a qualifying agreement would have to be entered into 28 days before the wedding. Most lawyers have since adopted this as best practice.

That’s not to say that 28 days is a rule. Sometimes, one party will have a draft agreement prepared well in advance but the other will negotiate changes. If the delay in signing the document is down to the weaker party upwardly negotiating the provisions, then this could strengthen the agreement — but it depends on the circumstances.

Lawyers agree it is very important that both parties have independent legal advice. The person who wants the pre-nup should offer to pay — ultimately they will receive the benefit. If one person doesn’t have legal advice, or has poor advice because they couldn’t afford a good lawyer, then this will undermine the agreement, says Ms Balfour.

The cost of a basic pre-nup is £1,500 for someone with an inherited home or business, plus an extra £1,000 to cover independent legal advice for the spouse. The wealthier you are, the more the costs will increase — not necessarily because the lawyers will see you coming, but more complicated financial circumstances will take much more time to discuss.

Considering the average cost of a wedding in the UK topped £30,000 last year, according to data from wedding planning site Bridebook.co.uk, the cost of a pre-nup should not break the budget.

Those couples who have not agreed how to split their assets before marrying can still make legal agreements. Post-nup agreements are a new trend. They work in the same way as pre-nups and are usually entered into when one spouse is about to receive new assets.

They are most useful when there has been a particular change of circumstances including where a large amount of money has been introduced from an outside source, for example, the receipt of a large inheritance.

While still relatively rare, Ms Balfour says she has prepared quite a few in the past two years. “They are most common in relatively young couples where one is due to inherit an amount of money from a parent,” she says, adding that in most cases, it will have been the donor parents who put the idea into their son or daughter’s head.

Post-nups are also increasingly used when older couples — perhaps consisting of two former silver splitters — engage in inheritance planning. It often makes sense for them to enter into a post-nup at the same time. I wonder how many adult sons or daughters are putting pressure on their parents to do so when they enter new relationships in later life?

While your motivation may be to protect the family’s wealth, tread carefully — the mere suggestion that someone should enter into a pre or post-nup has the potential to cause an almighty family row.

However, Ms Balfour stresses that such agreements can benefit both the stronger and weaker financial party.

“The stronger party may feel less at risk — particularly if they have built up wealth prior to the relationship. The weaker financial party will have some security. They know they will come away with a fair sum, although it might not be as much as they could get without the agreement, but they avoid the cost and stress of letting a judge decide.”

One couple for whom Ms Balfour negotiated a pre-nup, returned to her when their marriage broke down. She then worked on their divorce. “It went smoothly and was amicable,” she reports.

However, there are some problems that a pre-nup is unlikely to prevent.

Nearly a quarter of divorce cases in the courts in the past year involved disputes about custody of a pet, according to research by Direct Line drawn from the experiences of 100 family lawyers. Apparently, the average number of billable hours taken up by pet-related disputes is 25.

The mind boggles at some of the discussions that must take place: “You can have my children’s inheritance, but you can’t take Mr Tibbles.”

Lindsay Cook is co-founder of consumer website MoneyFightClub.com and co-author of “Money Fight Club: Saving Money One Punch at a Time”, published by Harriman House. If you have a problem for the Money Mentor to look into, email money.mentor@ft.com

Copyright The Financial Times Limited 2024. All rights reserved.
Reuse this content (opens in new window) CommentsJump to comments section

Follow the topics in this article

Comments