Following October’s budget, there has been an increase in capital gains tax rates to 24% (higher rate) and 18% (lower rate) with these increases to hit business asset disposal from April 2026.

This has pushed many, particularly farmers and family business owners, to consider/pull forward their succession planning, with company shares or other assets being passed onto the next generation sooner than expected.

It is imperative that any succession planning considers the circumstances of the next generation and what might happen on a divorce if shares or assets are passed without any form of protection.

In England and Wales, the starting point after a mid to long marriage, is an equal division of the matrimonial assets. There may be arguments about what is/is not a matrimonial asset but this is a topic for another day.

This article seeks to consider ways in which these assets can be protected on any future divorce. One way to protect assets on divorce is by the younger generation entering into a Pre or Post-Nuptial Agreement.

A Pre-Nuptial Agreement is a document entered into prior to marriage setting out how assets are to be divided on a future divorce. A Post-Nuptial Agreement does the same but for those that are already married.

Whilst not considered a romantic proposal, Nuptial Agreements are akin to an insurance policy – you hope you never need it but grateful for it should the worst happen.

Is a Pre/Post Nuptial Agreement legally binding?

Technically Nuptial Agreements are not legally binding. The parties cannot override the divorce court’s broad discretion to decide how to redistribute their assets/income on divorce. However, if certain criteria are met, they are most likely to be upheld by the court.

In a landmark case in 2010, it was decided that the “court should give effect to a nuptial agreement that is freely entered into by each party with a full appreciation of its implications unless in the circumstances prevailing it would not be fair to hold the parties to the agreement.”

Three-stage test for fairness

1.      The agreement must be freely entered into – there should be no undue influence or pressure. It is unlikely to be upheld if there is any evidence of duress, fraud, misrepresentation or unconscionable conduct.

2.      The parties must have a full appreciation of the implications of the agreement– it is desirable (although not imperative) that the parties provide full disclosure of their financial circumstances and understand the implications of the agreement they are entering into.  Independent legal advice is strong evidence of a party’s understanding of the implications of the nuptial agreement, though not conclusive.

3.      It must be fair to hold the parties to their agreement in the circumstances prevailing – “Needs trump all” especially where children are concerned. One party being left destitute whilst another retains significant assets is unlikely to be considered “fair”. However, there is nothing inherently unfair in seeking to ring fence non-matrimonial assets perhaps inherited prior to or during the marriage.

Do not forget to consider the implications of passing down wealth. Whilst seeking to protect shares/assets from an immediate concern, this may well cause (bigger) problems later down the line. If you have any worries or need more information, then please do contact a member of the Geldards Family Team.