Prenuptial agreements are becoming increasingly popular, and parents appear to be the driving force behind it.
With house prices relentlessly on the rise, many young couples find it very difficult to buy a home for the first time and some are turning to their parents for help. However, recent reports from The Guardian and the Daily Mail suggest that their parents may be wary of lending their children money.
Once a couple have married and begun paying a mortgage, they both have a right to claim a share of the house in the event of a divorce, regardless of how the deposit was paid for. If one spouse’s parents contributed what may be tens of thousands they may be very concerned by the idea of some of that equity going elsewhere.
As a result, many parents have demanded that their children sign a prenuptial agreement, commonly known as a ‘prenup’, before they agree to help them buy a home. These documents set out how various assets, such as the house and finances, will be divided if the couple divorce. If one set of parents has helped the couple secure a home, prenups can provide assurance that their child’s husband or wife will not unduly profit from a sale of the house.
Unfortunately prenups are not legally binding, despite a recommendation by the Law Commission to make them so. Judges will use them as a guide when they divide a couple’s assets but they are under no obligation to make a ruling in line with the terms of the agreement.
But while prenups are not a guaranteed form of legal protection, they can inform a judge’s decision. If your son or daughter needs your help to buy a house, it may be worth talking to them about a prenuptial agreement.
Where a prenup is going to be put in place it is essential that due consideration is given to making a new will. There are good reasons for this. Firstly, a prenup will by definition be a precursor to marriage or a civil partnership. Both of these events invalidate any existing wills, so they will need to be replaced. Secondly, the whole point of having a prenup is to protect assets that have been acquired or accumulated prior to the marriage or civil partnership, with the aim of preventing them from being dissipated should the relationship break down. Therefore, it is essential that those same assets are protected on death to ensure they go to those you intend. If you die during the marriage and there is no will in place then your husband, wife, or civil partner will stand to take the lion’s share of all your assets, whether they have been protected by a prenup or not.
When it comes to such a sensitive and potentially volatile issue, legal advice is essential.