Prenuptial Agreements: Is the Possible Upset Worth it?

Prenuptial agreements can be so difficult to do, writes FLiP Director James Pirrie.

You are writing a document that will (usually) largely dictate your financial arrangements if you were to separate perhaps years into the future. Almost always, these discussions feel uncomfortable: the engagement will have come first: a sense of committing your lives together forever … and then there is a push (perhaps from that quiet voice in your head or perhaps the louder voice from a family member) … “yes but what if things don’t work out as you intend … don’t you need to take steps to protect these already-held assets from an ambush … and of course [my][your] intended is not like that … but then if they are not, won’t they agree to a pre-nup even though it sounds ugly and difficult?” (I would call this The Reluctance Phenomenon).

I have come to endorse that quiet voice: yes of course your marriage is going to work … but if it were to falter and fall in the early years, sorting out the finances can be horrible. It is as if the family law in England & Wales has a bit of a blind-spot: the principles it applies that work fine for lots of situations often don’t work here at all well. Having an agreement so that everyone knows where they stand can be a valuable insurance policy against a miserable, slow and expensive grind through the courts.

On the other hand the pre-nuptial agreement that makes sense for the early years may make no sense at all where it is left gathering dust in the drawer until a separation perhaps a decade or indeed several decades into the future. Here principles that you decide to adopt today may operate catastrophically in the changed future circumstances at the point of separation. This might be simply because you did not live your married life mindful of the principles that you had set out in your pre nuptial agreement, or did not review it or terminate it when finally you found that the structure stopped being helpful to you.

Even though the circumstances are different beyond recognition, the pre-nuptial agreement may be compelling for the court and it may provide the prevailing principles for who gets what.

Because this is a challenging conversation, it is so often delayed and all too often it only commences as all the mayhem of wedding preparation is starting to come over the horizon at and this becomes another important task that you are now both struggling to fit into the diminishing weeks before the big day. So mostly prenuptial agreements are done in a rush and on the basis “well this is good enough, we can always come back to it”. (I would call this The Last Minute Phenomenon).

Believe us, no-one ever does come back to it.

“Committing your lives together” will often mean different things to different people … how you manage money will usually tap into some deep-rooted instincts that we generally acquire almost without noticing during our up-bringing. Little wonder that we are going to find differences in approach as we step out with our life partner into our independent married life.

The consequences of the “Reluctance” and “Last Minute” phenomenons are generally:

• There can be no deeper dive into these complex issues;
• There is no uncovering of those crucial differences in your approaches between you; and so
• There can be no robust way forward identified, articulated or agreed.

These differences are likely to remain (indeed are likely to have been further impacted by the shape of the pre-nuptial agreement) and sit there until there is some family crisis that brings the need to sort out a plan – clearly the worst of times to be trying to find solutions and a real risk to your future together.

And we know this matters not only instinctively but from research from the USA, based on German statistics, which suggests that couples who have differences in risk preferences are twice as likely to divorce.

If we were trying to do this better, we would not see lawyers as the arbiters of principled decision making. We would turn – and turn earlier in the year – to our counselling colleagues like FLiP’s in-house therapist Jo Harrison, to start to identify better ways through the maze.  There are some people truly at the top of the tree here and some books to read but it is an evolving world and you are welcome to make contact in case by the time you do there is a new range of solutions we can point you towards.

• Jacinta Gallant operating out of Canada is one of the world leaders in this domain.
• Simonne Gnessen is a financial planner in Brighton.

Simonne’s work is built upon insights from George Kinder, I thought most impressively “the 7 stages of money maturity” … Jacinta Gallant has built revolutionary new approaches from a spark provided by Judith Stern Peck’s book called “money & meaning…”

At FLiP we are looking forward to being able to harness these different perspectives in a new process which will be anchored in mediation, where you will work out the issues and the detail of the arrangements needed to support you through your future together. Further details will be available soon. If you would like to find out more, please contact FLiP Director James Pirrie at E: jp@flip.co.uk or T: 020 7420 5000.