When a couple makes the decision to get married, often the last thing they want to do is talk about the financial consequences of their relationship breaking down. However, while doing so may not seem romantic, this level of openness and honesty could serve to minimise litigation and dispute in the event of divorce.

What is a pre-nup?
A pre-nup is a written contract made between two people prior to their marriage (or civil partnership) setting out a scheme of division of their assets in the event of a divorce. With people marrying later in life, both parties might bring substantial assets (such as property or shares in a family business) into the relationship such as joint accounts, property or a family business. A pre-nup might similarly seek to deal with a home that the parties are attempting to purchase as the marital home, setting out what share in the property each will have and sometimes the contributions each will be expected to make to the running of the home.

Pre-nups may detail what level of ongoing financial support one party to the marriage might expect from the other in such circumstances and in some cases may purport to direct the future education and upbringing of children to the marriage excluding custody arrangements. There could also be children from previous marriages to consider. Further, a pre-nup might set out what happens in the event of one of the parties dying, for example by specifying that the surviving party will have no claim against the deceased party’s estate. This may be seen as important in protecting the interests of children or step-children.

Are pre-nuptial agreements enforceable?
At this time, pre-nups are unenforceable in English courts; it is for the Court to decide how assets should be divided between parties in the event of a divorce or separation.

However, English Courts have begun to take some notice of pre-nups. While a judge will not be bound by such an agreement, s/he may take it into account when deciding any financial application. For example, where the pre-nup seeks to limit the money to which a party to the marriage is entitled following a divorce, judges have awarded that party more than the sum provided in the pre-nup, but less than that party might have expected to receive in its absence.

An alternative solution to pre-nups
Since a pre-nup is not enforceable, is a trust a suitable alternative to protect assets from the claims of a spouse (or civil partner) in the event of a divorce?

Certainly, trusts have long been used for asset protection purposes and historically the courts have been unwilling to set aside the terms of validly created trusts. However, the courts have demonstrated an increased willingness to effectively re-write, or on occasions, entirely ignore the provisions of trusts where the court considers that the main motivation for the creation of a trust is to frustrate the legitimate claims of a third-party creditor (such as a divorce claimant).

Family trusts are commonly established to make provision for the children and grand-children to a marriage. Again, however, on divorce, an English court will enquire into both the form and substance of such a trust. If, in all the circumstances, it considers the marriage party who created the trust capable of benefiting from it, it may deem the assets of the trust to be a financial resource of that party and consequently take them into account when deciding the level of financial provision to be made to the other party to the marriage.

However, trusts may, of course, be established in entirely legitimate ways for entirely legitimate reasons. Unlike pre-nups, the rights and obligations of the various parties to a trust are fully enforceable in English courts and, appropriately drafted and administered, will provide considerably greater certainty than pre-nups.

Talking about pre-nups can stir up uneasiness and unhappiness between couples who are ready to enter into a relationship and to share their lives together. A trust is established before marriage, it can be a simpler, straightforward and less contestable way to manage your wealth.