There is no guarantee that a personal injury award will be ring-fenced on divorce or be free from a claim from a cohabitant. A nuptial or cohabitation agreement can however be used to safeguard your award and provide certainty on your finances during a relationship breakdown.
Protect finances with a pre and post-nuptial agreement
A pre-nuptial agreement (also commonly referred to as a ‘pre-nup’) will map out how your finances will be divided in the event of a separation. A post-nuptial agreement is the same as a pre-nuptial agreement, the only difference being it is entered into after marriage. Either of these can be used to help vulnerable individuals protect their finances. These can be used if there has been a change of circumstance after marriage, such as the payment of a personal injury award. They can also be used if there hasn’t been enough time before the marriage to complete a pre-nuptial agreement.
A nuptial agreement cannot stop a financial claim being made to the court on marriage breakdown, however, if a claim is made the nuptial agreement will be a relevant circumstance. Provided the three-stage test in the case of Radmacher v Granatino have been complied with the agreement will be given decisive weight and parties should expect the court to hold them to the terms of the agreement.
In Radmacher v Granatino [2010 UKSC 42] the Supreme Court enforced a pre-nuptial agreement and confirmed that ‘the court should give effect to a nuptial agreement that is freely entered into by each party with a full appreciation of its implications unless in the circumstances prevailing it would not be fair to hold the parties to their agreement’.
Protect your finances with a cohabitation agreement
A cohabitation agreement (also known as cohabitation contract, cohabitation deed or living together agreement) will clearly declare the legal and beneficial interests in a property and avoid potential claims and costly litigation. This will help vulnerable individuals protect their finances when starting to cohabit. The agreement can also record whether there is to be a sale or transfer of the property in the event of a separation and allow you to map out how this will happen. It can also be used to record the financial and practical arrangements you want to make during your relationship.
There are no set rules on when a cohabitation agreement should be executed. If property is being purchased with the intention of it being occupied as the family home, it is advisable for the agreement to be completed at the same time as completion of the purchase. This will ensure that your intentions are clear and have been recorded at the outset.
If you are moving in together after purchase of a property you can enter into a cohabitation agreement at any time. It is not critical for the execution of the agreement to coincide with the commencement of your cohabitation. It is more important to ensure that there has been time to reflect on the terms of the agreement and neither of you feel under any pressure to sign it.
Cohabitation agreements are not just for those in a cohabiting relationship. Anyone pooling their resources to provide a home, or an investment should consider having one.
Watson Morris protecting finances of vulnerable individuals during marriage or cohabitation.
The team at Watson Morris Family Law can help you navigate the law on nuptial and cohabitation agreements. For an initial free no obligation discussion to see how we can help please contact us.
Written by Caroline Watson
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