Contracting Out (Prenuptial) Agreements
A comprehensive overview of the Property (Relationships) Act 1976 can be found on the Ministry of Justice’s website.
A little bit of advice…
If we could have a dollar for every time a client has said, “No…I don’t need a contracting out agreement – we are in love and we will last for ever……” Agreed it is a subject no new couple ever wants to have but if you are honestly bringing way more into the relationship – you may have a business, your own house and other assets – and your new partner is just bringing his/her bags….then our advice is to make sure you have a Contracting Out Agreement. Remember, just because you are wanting to contract out of the Act, does not mean you are intending to financially cripple your new partner. It actually gives you both an opportunity to sit down and look at the combined assets you are bringing to the new relationship and deciding for yourselves how they are to be divided. If you don’t, you will be governed by the equal sharing rules in the Act.
There are at least two situations where clients should carefully consider the need for a relationship property agreement.
For more, click on “Read More…” below
The first situation is where you are in the early stages of a relationship and it becomes clear that one or both of you have assets or other property that you wish to continue to treat as your own separate property rather than as shared or relationship property. This sort of arrangement is called a Contracting Out Agreement.
Contracting Out Agreements are often recommended for people who are purchasing or may already own their own home prior to the relationship. They can also be important where one of the parties has a much greater asset base they wish to protect or where an older couple already have children and assets from an earlier relationship they wish to preserve.
The second situation where you may need an agreement is where you are in the process of separation. This is called a Property Separation Agreement.
The purpose of the agreement is to make sure that if you divide the assets, property and debt from your relationship, then both parties are secure in the knowledge that the division and any distribution of cash and assets cannot later be revisited by the other party. This can be particularly important where one of you is paying out the other’s share in the family home or business and you want to have some security in knowing that you (or your estate) cannot be subjected to a claim by your former spouse/partner (or their estate) to a greater share in that asset.
If you are unsure whether you might need a relationship property agreement or you wish to get some advice on how and when this kind of agreement could be helpful for asset planning or estate planning, then please contact one of our specialists below.
