Couples who enter into a Declaration of Trust or prenups before buying a property together are being warned they could end up with nothing if they get divorced.  The risks are even higher if the couple chooses a ‘DIY’ prenup based on the many online templates now being made available.

Both DIY prenuptial agreements and Declarations of Trust are becoming more popular as disposable incomes become increasingly stretched.  However, the law around both options must be understood because it is highly likely neither will achieve the desired result, to make sure both parties leave the marriage with the share of their property and other assets they feel they deserve.

In the case of a prenup, while these are not yet legally valid in the UK, they are very often respected by the courts as long as they have been drafted correctly and signed under the correct circumstances.

In the case of a Declaration of Trust, these are legally valid.  However, they are only valid before marriage and not afterwards.

Prenups when buying a property: What could make a prenup invalid?

As we have said, while a prenup isn’t legally binding, they are increasingly being considered by the courts while they deliberate on the fairest division of assets, income and pensions at the time of divorce. 

However, they will be considered invalid and discounted if they haven’t been constructed and drafted properly and cannot stand up to scrutiny.  The most frequent reasons a prenup is deemed invalid include:

• The content is fraudulent because one or both parties has either undervalued or not disclosed all their assets.
• Either party signed without the proper independent legal advice and representation.
• One party signed the agreement under coercion or duress.
• One party did not have the required mental capacity to sign the document.
• The paperwork was never properly filed.
• The content contains careless errors or is missing required details.
• There are obvious punitive clauses, i.e. those intended to punish an unfaithful spouse.
• The agreement clearly favours one of the parties.
• The agreement contains ridiculous provisions (e.g. weight gain, frequency of sexual relations, frequency of visits by in-laws).
• The omission of assets not directly linked to the marriage, i.e. business interests.
• The omission of overseas assets.
• The omission of a review clause (prenuptial agreements should be reviewed every 5 to 10 years with a family lawyer as circumstances will change).

These examples relate to ‘professionally’ drafted prenuptial agreements.  As you can imagine, the use of boilerplate agreements downloaded from the internet or drawn up by non-qualified teams sitting behind websites advertising low cost prenups has significantly increased the likelihood a prenup is not worth the paper it has (or maybe hasn’t) been written on.

This is a huge risk to the couple. 

A single mistake in a contract will render the rest of the document void.  Given the couple’s property will almost certainly be their highest value assets and, therefore, the source of some much needed capital with which to start the next chapter of their lives, the cost of choosing a DIY prenup could be huge.

What are the risks with a Declaration of Trust?

A Declaration of Trust is a legal document that confirms the terms on which an asset like a property, is held on trust.  With a property, the Declaration of Trust records which party owns what portion of the property.  Many couples will sign a Declaration of Trust if they are buying a property together before getting married.

This is the crucial point.

Although declarations of trust are legally valid before marriage and can afford some couples some welcome tax benefits, they do not simply carry over into married life.  In fact, upon getting married, the document is immediately overwritten by matrimonial law.  As a result, it is almost certain the Declaration of Trust will be worthless should the couple get divorced.

The couple’s assets will not automatically be divided in accordance with the ownership split set out in the Declaration of Trust unless the terms are replicated in a pre- or post-nuptial agreement …

… but only, of course, if the nuptial agreement has been correctly constructed and drafted by an experienced family lawyer.

If you would like to discuss a pre- or post-nuptial agreement or the various legal options you can use to secure and protect your most valuable assets before and after marriage, please contact us today.