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Your agreement: Is it still worth the paper it’s written on?
4th April, 2018
Ensure you don’t allow your cohabitation, pre or post-nuptial agreement to fade into irrelevance with these key guidelines on when to review.
Previously, pre- and post- nuptial and cohabitation agreements were often seen as a rainstorm over a parade, an indication of lack of trust or love. However, the changes in the property market, average age of marriage and developing case law means that these agreements are now viewed as a sensible way of clarifying expectations and avoiding future disputes.
It is widely reported that young people are struggling to purchase property and establish a presence on the property ladder. Increasingly, parents are releasing capital in order to assist in raising a deposit, in some cases drawing down pension funds or mortgaging property. As this can be at the cost of their future retirement fund, many parents are keen to see their contribution recorded in order to protect those funds in the event of a relationship breakdown.
The age of marriage is also shifting, with an increase in couples entering into their first marriage in their thirties rather than their twenties, and couples re-marrying over the age of 65. With such marriages brings well-established financial structures including inheritance, pension pots and property. Older couples also have the consideration of protecting future inheritance for children from previous marriages, especially where these funds have been generated from a first marriage, or a pension fund built entirely prior to the marriage.
We have observed an increase in clients giving serious consideration to these concerns and entering into cohabitation and pre-/post-nuptial agreements. To ensure the court gives proper consideration to such documents on the breakdown of a relationship, they need to be accurately drafted and legal advice is imperative at the outset, together with evidence that full disclosure has been presented by both parties.
Clients so often take steps to initially protect their assets but then fail to undertake periodical reviews to reflect a change in circumstances. It is recommended:
- All agreements should include a review clause, which calls for the parties to the agreement to consider if their intention has changed periodically. It may be that after a review, the parties consider the agreement to still be relevant and no change needed.
- It is important to conduct a review of the agreement in anticipation of a shift or change in relationship. The most common is when a child is born, whether or not it is the first child of the relationship. The court will have different considerations around the division of property (for both married and unmarried couples) when there is a child of the family. It is important that your agreement provides for these considerations.
- To review when you carry out substantial renovations to a property, thereby increasing its value. This is especially relevant where the contributions to the renovations are unequal between the parties. An updated agreement can provide for this change, avoiding the potential of dispute over shares of the property in the future. Similarly, reviews should also be considered when equity is released from the property, especially if this equity is shared unequally.
Without a review, these agreements can be considered out of date or obsolete and the court may be less likely to give them consideration.
We understand it is important to ensure that your position is protected throughout the inevitable changes that life provides. If you would like any further advice in relation to this matter, please contact a member of our Family Team who would be happy to discuss your situation.