Continuing our discussion about the lifecycle of the prenup, anyone looking to enter into one needs to understand that there are three basic kinds.

1.       The first is a “ring fencing” agreement. This simply safeguards what’s been built up during the marriage. It’s a relatively common arrangement if both parties are coming into a relationship bringing in their own money. What you are essentially saying is ‘we’ve each got enough to meet our own needs and we’re going to keep that money separate’. This is similar to property regimes which can apply by default in many foreign jurisdictions and in the US. Our default system in England doesn’t separate out property in this way so it’s a way of achieving a clear delineation. However, with this kind of agreement you do need to keep an eye on what happens during the marriage so that monies aren’t mingled. The prenup should also provide for what happens if you decide to pool resources, for example to buy a new property.

2.       A “tariff” agreement. A tariff agreement (which has nothing to do with the Trump administration) is where for each year or period of marriage, a greater level of provision is made. Often tariffs have different “tracks”. There might be a basic track without children and a more generous track where there are any children, with some crossover at a particular stage of the marriage. Tariffs can be useful where if you want to accept expectations and plan but the fixed nature of particular numbers being offered on particular dates means you can’t be certain that it will meet the recipient party’s needs at the time the marriage breaks down. You also may find yourself with significant stepped increases after so many years of marriage. Sometimes that can lead to uncomfortable conversations as one party approaches a significant anniversary thinking about the provision then due under the prenup.

3.       “Reasonable needs”. These are the most common prenups in England at the moment. They provide for a formulaic approach to financial provision at the end of the marriage. Often there will be some formulae applied so for example a sum will be set aside for reasonable housing needs for a property in the same sort of area as the family home but perhaps on a smaller scale or within a reasonable geographical radius. Sometimes the definitions include a particular number of bedrooms – perhaps an additional one per child and a spare. On the income side, often reasonable needs is defined as a particular standard of living but not necessarily at the same standard of living as was enjoyed during the marriage. These agreements are more flexible than a tariff arrangement as it’s possible to provide for what happens if there isn’t sufficient money to meet needs. This mechanism is sometimes known as a “Schedule 1-type”. This is because under Schedule 1 of the Children Act 1989, it’s possible to make capital payments to a parent of child and often these payments revert to the paying party at the end of the marriage. So if the provision under the agreement isn’t sufficient to meet needs, the paying party can effectively loan money on a long term basis to the other party which reverts at the end of the child’s minority or when they complete their tertiary education.

So how do you decide which of these is the right option? You’ll need to discuss this with a family lawyer but in broad terms it depends on whether your priority is certainty of provision (in which case a tariff is more likely to suit your requirements) or whether you prefer the flexibility of a formulaic approach.

Other matters to consider within the agreement are how you will run your finances during the marriage and who is going to pay for what, and what happens if the marriage ends by reason of one party dying. Often there is a clause which says that there will be new wills made with provision at least as generous as that setout in the agreement.

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If you require any advice on prenuptial agreements, please contact the team at Burgess Mee on mail@burgessmee.com.

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