Charles Calkin of James Hambro & Partners offers some tips on how to ask your children or grandchildren to make a prenuptial agreement before you give them a lump sum.
What a couple accrues between them during their marriage or civil partnership is usually shared equally on divorce, but there is an argument for trying to ring-fence significant gifts made by parents and grandparents using a prenuptial agreement. This can help prevent an estranged spouse taking precious family wealth and assets.
A good lawyer will help in setting up a prenuptial agreement that articulates clearly an agreed position in respect of any gifts if the couple divorces.
Families should also see their financial adviser, as this might also form part of their inheritance tax planning.
The real challenge is often asking for one. As prenuptial agreements become more common this will get easier, but here are some tips in broaching the subject.
1. Don’t put it off
I’ve known of anxious, procrastinating parents starting the conversation on the eve of the wedding, which is the worst possible moment. A prenuptial agreement should not be signed under duress if it is to be effective, and there should be at least three clear weeks between the signing of the agreement and the ceremony.
2. Use the data
Acknowledge that more than 40% of marriages end in divorce to demonstrate that this is not a comment on their choice of life partner but on life and the challenges of marriage.
3. Set expectations
Be clear about how much you are giving and what you would like it to be used for. Your child or grandchild may not accept the terms and therefore decline the gift, but it is important that they understand your expectations explicitly.
4. Don’t break your word
If you have offered a gift without conditions it is very hard to try to apply them retrospectively.
5. Include both partners
Try to have the discussion with both partners so that you can be clear and transparent about your good intentions. Your lawyer will expect the other half to take legal advice independently and you should encourage this, too. His or her parents may also want to contribute a substantial gift and may be relieved that the issue of prenuptial agreements has been raised.
6. Look ahead
A prenuptial agreement can take into account future gifts that you might make or bequeath on your death. There should be no need to repeat the exercise for these, but you may need to keep this under review as circumstances and legal standards change – as do rules around inheritance tax planning (IHT).
7. Share the love
While discussions are under way to discuss the agreement, try to find ways to show that you welcome your new family member. Of course, if you don’t approve of the marriage that will be hard, but remember that this is your child or grandchild’s choice of partner and you have to show respect. Ultimately, you want both of them to be happy and for your gifts to enhance their life together.
For better, for worse in numbers
The average bridegroom was 29.5 in 1950 (the average bride was 26.4). Today, the groom is around 37.5 years and the bride just over 35. Gay couples tend to be older – 40 for men and 37 for women.
In 1950, there were 358,000 marriages. In 2015, (the most recent data available at the time of publication) it was 239,000.
It is estimated that 42% of marriages end in divorce and a third of marriages will end in divorce by the 20th wedding anniversary. The average marriage is expected to last 32 years.
Charles Calkin is a partner and financial planner at James Hambro & Partners.