10 things to know before entering into a pre-nuptial agreement

Article 19 August 2021 Experience: Divorce and family lawyers

A pre-nuptial agreement, or a “pre-nup” as they are commonly called, can be one of the most significant documents a couple signs together in anticipation of marriage.

Time-stretched and stressed over wedding preparations, couples tend to routinely sign documents without batting an eyelash. These include purchasing a property together, paying hefty deposits to secure their dream wedding venues, or accepting the Terms and Conditions in record speed to set up a Netflix account together. While these actions may seem insignificant, they play an important role. Taking these actions seriously ensures that a relationship thrives, as each decision made together helps two people reach a common understanding and expectation on issues.

If couples have a common understanding on what to expect from each other during a marriage, then why wouldn’t they also want to have a common understanding if they mutually decide to part ways? A pre-nuptial agreement is like an insurance policy. You might feel inclined to take a risk and do without one, but you will be glad to have one in place in the event things take an unexpected turn. Simply put, just like a medical insurance policy, you would rather not have to rely on it but should the unwelcome happen, you would be glad for the coverage and protection.

Pre-nuptial agreements are not just for the ultra-rich, or for individuals from wealthy families. They are perfect for couples who appreciate clarity. These are couples that have a relationship based on mutual respect and understanding, and that wish to avoid unnecessary acrimony, expensive legal bills and long-drawn Court proceedings. A pre-nuptial agreement is not just about settling the finances, it can also set out how you and partner intend to part ways amicably in the event of a divorce and parties’ understanding in the period leading up to divorce.

If this sounds like you and your partner, below are 10 things to know before entering into a pre-nuptial agreement.

1) Where you choose to sign matters

At first glance, this might seem like an insignificant issue. However, any experienced family law specialist will flag this out to be a key area of concern.

As a starting point, you may wish to consider which country your partner and yourself are likely to reside in during the marriage as well as the nationality of yourself and your partner. Seeking advice from a family lawyer with appropriate expertise is key. Choosing the country that governs your agreement has a significant impact on its enforceability. What good is it to have an iron-clad pre-nuptial agreement, only for you to find out much later on that you can’t enforce it in the country you live in?

This is why it is important to have a pre-nuptial agreement drafted by family lawyers with specialist knowledge, and who have a good network of family lawyers in other countries, such that the agreement is drafted with all international elements being considered.

2) Third parties cannot be bound by a Pre-Nuptial Agreement

As a pre-nuptial agreement is only between you and your partner, you cannot bind other third parties (such as parents, siblings, etc.) in your agreement. For example, you cannot bind your partner’s parents to do anything in a pre-nuptial agreement. If there is a need for this, you should flag this out to the lawyer advising you in respect of the pre-nuptial agreement to see if they can offer you with any other solutions on how you can best protect your rights vis-à-vis a third party.

3) A Pre-Nuptial Agreement is not the be all and end all

A common misconception is that you may not change any terms once a pre-nuptial agreement is signed. While that is true in relation to that specific document, it does not prevent you and your partner from executing any further documents to deal with new issues that arise during your marriage, or if you wish to update or vary any of the agreed terms (by mutual consent) that were mentioned in your pre-nuptial agreement. This is known as a post-nuptial agreement. It is perfectly normal and recommended for a couple to enter into an agreement post-marriage if it is necessary.

You should consult with a family law specialist to enquire if a post-nuptial agreement is necessary in your situation.

4) Arrangements relating to children should be refrained

If you intend to have children with your partner, you may be keen to come to an agreement on how you will care for your children upon a possible divorce. However, this is generally unadvisable as such agreements will rarely be upheld by a Court upon divorce.

This is because the Court has to determine if the arrangements are in a child’s best interests, and that will be best determined at the time of the divorce, and not at the time when a pre-nuptial agreement is signed where there are no children of the marriage yet. It will be hard for you and your partner to truly anticipate where your lives may lead, and more importantly, what may be best for your child in that situation.

The Court in Singapore is always able to review all agreements between parents concerning arrangements relating to children. If a divorce is imminent, having a considered discussion on arrangements for the children and setting out the agreement in a post-nuptial agreement would be better. As always, do speak with a family lawyer specialist who would be able to advise you on your situation.

5) Independent legal advice for both parties is highly recommended

Both you and your partner will need to obtain separate and independent legal advice on the pre-nuptial agreement. This is essential to ensure that a pre-nuptial agreement is enforceable, and one party does not come back to say that they were unaware of what they were signing at the time. It is important for both you and your partner to willingly enter into the agreement with your eyes wide open and to understand what you are agreeing to.

Having independent legal advice and representation also ensures that you and your partner are able to navigate the process and set out your joint understanding on how the two of you wish to settle your affairs in the event of a divorce.

6) Disclosure of all assets and financial resources is paramount

Couples will need to make full and frank disclosure of all assets and financial resources they presently have, or assets which they believe they will acquire. This would include any inheritances or gifts you believe you will receive in your lifetime. This is important as it could render the entire pre-nuptial agreement unenforceable if it is proven that one party did not make full and frank disclosure of their assets during the time it was signed.

Disclosure is also important to ensure that you and your partner are fully aware of what you are entering into and the understanding on how these assets and financial resources would be dealt with in the event of a divorce.

7) Understand what assets you own

So you want to make full and frank disclosure, but what assets do you make disclosure of? It is crucial to be aware of what assets you have, and what can or should be included in a pre-nuptial agreement. Does a joint bank account you have with your parent constitute as an asset you own? What about distributions from a trust fund for which you receive occasional payouts? Should this be included in a pre-nuptial agreement? This is where a family law specialist is crucial in ensuring a holistic and enforceable pre-nuptial agreement is drafted that is tailored to your situation.

8) The difference between assets acquired before and during a marriage

You should have a clear understanding of what assets you have prior to being married, and what assets you think you may acquire during your marriage. You should also know the repercussions of the timing of owning such assets.

Typically in Singapore, assets acquired before a marriage will not be split between you and your partner in a divorce, unless such assets have either been used by your spouse during the marriage, or if they have been liquidated to acquire another asset during the marriage. For assets acquired during a marriage, these will likely be split between you and your partner upon divorce.

However, if you and your partner reach a mutual understanding regarding what assets should or should not be split upon divorce, this would be reflected clearly in your pre-nuptial agreement. This is recommended as it encourages clarity, and ensures that neither you nor your partner waste time and legal costs arguing about dividing such assets upon divorce.

9) Have a conversation with your partner on the need for a pre-nuptial agreement

A pre-nuptial agreement like any other agreement is an agreement between parties. Both parties must willingly sign a pre-nuptial agreement, and you cannot force your partner to do so if they do not want to. For obvious reasons, it is not a good start to a marriage to force someone to do something they are not comfortable with. More importantly, this may lead to the pre-nuptial agreement being void.

Broaching the topic with your partner may be uncomfortable. Think about it as planning for the future and as a comprehensive insurance. You rather not have to rely on it but should the unwelcome happen, both of you would have been fully prepared and like any good insurance policy, fully covered.

10) You must be clear about your intentions

Last but not least, it is strongly encouraged to be clear with your partner (and the lawyers involved) about what your intentions are with the marriage. Specifically, how you wish to organise your finances and assets. Things do change in a marriage. Partners may take on different roles from the one they envisioned prior to marriage, or you may be hit hard with a financial setback that requires both of you to recalibrate quickly.

Whatever the case may be, something that can be cultivated and that should remain a constant between you and your partner is the ability to have an open and honest dialogue about your thoughts and wishes. Doing so prior to having a pre-nuptial agreement signed is a good first step.

It can only benefit you to be clear about your wishes and expectations. As such, it is strongly advised to be clear about your intentions before entering into a pre-nuptial agreement, as to ensure that such intentions are reflected clearly by your lawyer in the agreement.

This article was first published by Asia Law Network here.

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