Advisers dealing with UHNWs are often at pains to tell you everything they do for their clients is ‘bespoke’. They are purveyors of carefully considered solutions developed for the specific, complex needs of their demanding clientele. And they charge accordingly.
So it’s a surprise that the latest trend among lawyers catering to wealthy families is to offer something a little more ‘off the shelf’. So-called ‘precedent prenups’ are designed to do what they say on the tin: to set a precedent or framework for marriage contracts, which can then be further personalised – up to a point.
The most interesting thing about them, however, is who is deploying them. Precedent prenups have emerged as a tool for wealthy families that can be understood as an extension of a family constitution, a formalised set of principles to guide family members.
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A precedent prenup is a template document that adheres to principles agreed within a family. The expectation is that the document is used as the basis for each family member when they prepare to enter into a marriage contract, which can then be tweaked and honed according to their own circumstances.
‘It’s a background document, but it’s not the end product,’ says Frances Bailey, a partner in Mills & Reeve’s family law team who is among those pioneering the trend. ‘The end product for any given family member still needs to be negotiated. You can’t just print it off and put parties ’names on it.’
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‘Prenups are a well recognised method of wealth protection and preservation,’ says Priyanka Hindocha, UK head of the family office division at Stonehage Fleming, who notes that it is not unusual to include a reference to the requirement to have a prenup in family constitutions. However, she says the practice of including a ‘precedent prenup’ template document as an annex to such a constitution is not yet widespread.
‘Any family with generational wealth can benefit from a precedent prenup,’ says Bailey. ‘It provides a clear, agreed-upon method of ringfencing core inherited assets. This is particularly strengthened in cases where family constitutions include clauses requiring members to engage with these documents or risk forfeiting their inheritance.’
This article first appeared in Spear’s Magazine Issue 96. Click here to subscribe
With additional reporting by Caitlin Kilpatrick
