Info & Advice

Can I protect my assets without a prenup?

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There are many reasons a couple may not want to enter into a prenuptial agreement, yet still want to protect certain assets acquired before marriage. But can such assets be protected without a prenup? This article discusses alternative options to insulate assets from being divided if the worst happens.

What happens if I don’t want a prenup?

If you don’t want a prenuptial agreement, the outcome if you divorce will be decided at the court’s discretion, often leading to unpredictable results. Those marrying later in life or for a second time are particularly at risk of losing their pension on divorce, which would otherwise be protected by a prenup. The court’s discretion is much wider when there is no prenup in place, with needs being much more generously interpreted when compared to the way they are assessed if there is a prenup.

Setting up a trust

Trusts are legal arrangements where ownership of certain named assets can be held in trust for the benefit of someone else. These assets are then intended to pass directly to a beneficiary upon the death of the person who set up the trust. All types of assets can be included in a trust:

  • Property
  • Stocks and bonds
  • Savings accounts
  • Life insurance

An advantage of a trust over a prenuptial agreement is that they don’t require the agreement of the other party and means it can be created before you get married to protect your assets without getting the agreement of your partner. There is also nothing preventing you from having a trust as well as a prenuptial agreement if you wish.

It is essential that the trust is set up correctly if it is to offer genuine protection. Seeking the help of a specialist lawyer will give it a much better chance of standing up to scrutiny in the event you divorce.

Why would you set up a trust?

You can ask a solicitor to draft a trust to provide protection for your non-matrimonial property, particularly if you:

  • Have children from a previous relationship
  • Have amassed substantial wealth and assets before the marriage
  • Are getting married later in life
  • Own a business
  • Have received an inheritance you want to protect

Trusts can be particularly helpful if you have children from a previous marriage whom you want to protect and provide for. They can be named as beneficiaries of the trust, which means that all of your assets will transfer to them when you die. In addition, because the trust and not the spouse technically own the assets within the trust, they cannot be included as part of the matrimonial pot if you divorce, providing they are set up correctly.

Keeping finances separate

If you have a bank or building society account, or other funds before getting married and you want to keep them separate from your spouse, it makes sense to ensure your accounts are not mingled. Once this money is intertwined with your spouse’s or used for family or matrimonial expenses, it becomes matrimonial property, which is likely to increase the likelihood of it being divided if you divorce.

Protecting a business

If you don’t have a prenuptial agreement, and you or your spouse own a business, it is important to obtain a valuation of the business prior to getting married. This way, you have a record of the value of the business before appreciation, which ensures the value of it during divorce is not threatened.

The court will take into account when the business was founded and how much it has grown during the marriage. The court’s default position is usually for a business to remain with its founder, which is made easier when other high-value assets can be divided to offset a spouse’s entitlement to a share in the company. The more records you have of non-matrimonial assets, whether or not relating to your business, will stand you in better stead if it comes to divorce.

Ringfencing non-matrimonial assets

If you are ringfencing non-matrimonial assets with loans, you should understand they are capable of being contested. In effect, a loan is likely to be viewed as something that needs to be paid back, meaning it can’t be divided on divorce. However, a spouse could claim that the loan was a gift that was never intended to be repaid. Because of this, the loan agreement should clearly detail the amount being lent and any terms and conditions, as well as being signed by both the person loaning the funds and the recipient.

If you have non-matrimonial assets you want to protect, you must ringfence them throughout the marriage. The protection afforded to non-matrimonial assets is weakened if they have been used to financially support you and your spouse during the marriage. This can include money you have withdrawn from a trust or that you have acquired from additional properties you own.

You should also be cautious of using money from assets you acquire after separating to support your spouse prior to your divorce settlement being finalised. Doing so could give your ex some rights to those assets.

Protecting your right to the family home

Family homes fall within the category of matrimonial assets, which means that both parties are entitled to a share of it. But what happens if the property is solely in your partners name? Here, you will need to take some action to protect your rights to the property. If your home is registered at the Land Registry, you can protect your rights using a “matrimonial home rights notice”.

If additional properties are in your spouse’s sole name, you can register unilateral notices against them to prevent your ex from disposing of or mortgaging the property during divorce proceedings. Although, you will need to prove your interest in the property in order for the unilateral notice to be granted

Consent order

This is a legal document that confirms the agreement made between you and your spouse during the divorce process and sets out how you will split your assets. After the court approves the order, it is legally binding and cannot usually be changed unless an appeal is upheld by another judge. The consent order will include a rationale describing how you have decided to divide the assets, which enables the judge to check that everything is fair and achievable.

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