Contracting Out Agreements

Have you recently entered into a relationship with someone? Or, do you have assets you want to protect? Perhaps you simply want to know more about ways you can protect your assets when entering into a relationship.

Assuming the former, you’ve likely heard about a contracting out agreement AKA prenuptial or pre-nup. The correct name is a “Contracting Out Agreement” as it allows couples to “contract out” of the Property (Relationships) Act 1976 (the “Act”).

In its most basic sense, a contracting out agreement is a legally binding document which records a couple’s agreement as to:

  • which assets will remain a party’s separate property;

  • what circumstances, if any, will a party obtain a share in that separate property; or

  • upon either death of a party, or separation., how relationship property will be divided.

The purpose of which is to simply provide clarity and security for both parties through outlining their respective interests, rights and obligations regarding property ownership.

The ol “my partner and I have talked about it, we promise not to go after each other’s property” does not really pack much of a legal punch in the eyes of the law. Any oral or written agreement made between two parties will not be binding unless entered into in compliance with the Act. It is this requirement which requires each party obtain independent legal advice.

As touched on earlier, your lawyer will explore the follows areas:

Protection of pre-existing assets: If one party has significant assets prior to the relationship, a contracting out agreement can help to ensure that those assets are protected in the event of a separation, and this means more than just the family home e.g. inheritance;

Ensuring financial security: A contracting out agreement can help both parties to understand their financial rights and obligations, which can provide them with a sense of security;

Avoiding disputes: The terms of a contracting out agreement are agreed upon in advance, which can help to avoid disputes over property division in the event of a separation or death; and

Establishing a fair agreement: Contracting out agreements are legally binding, and typically drawn up by legal professionals, which helps to ensure that the agreement is fair and equitable for both parties.

What do we mean by “protection”?

Contracting out agreements protect against a number of issues that may arise in the event of relationship break down, some common issues include: 

  • Unequal distribution of property: contracting out agreements can ensure that property is divided fairly, equally and in accordance with your intent, rather than being left up to the discretion of the court;

  • Disputes over ownership: contracting out agreements can clearly define who owns what property and can prevent disputes over who has the right to certain assets;

  • Hidden assets: contracting out agreements can require full disclosure of assets, which can prevent one party from hiding assets and potentially keeping them out of the property settlement;

  • Creditor claims: protects inherited or trust property, which may not be subject to the usual laws of relationship property, from being included in the property settlement; and

  • Protection of business assets: protect business assets from being included in the property settlement.

Contracting out agreements should not be a daunting task. It’s important that such agreements are entered into freely, with full disclosure and without duress.

To conclude

If there is a material disparity between the assets of each partner, and you wish to ensure those assets are protected, a contracting out agreement could be the way to go. Agreeing how to divide or exclude separate assets from the pool of relationship property through execution of a contracting out agreement is a far more amicable and cost effective option than seeking recourse through the Courts.

Want to know more?

We offer FREE one-on-one consultation with one of our lawyers through our online scheduler.  All of our consultations can be carried out in person or via Zoom and carry absolutely no obligations for you to engage with us – if you head up to our offices at the White Hart, we will even throw in a free coffee!

Will Downey