Pre-nuptial agreements why, when and how

Posted: Friday October 9 2020

By: Rachel Roberts

Over the last few years, we have seen a huge increase in the number of pre-nuptial agreements that we are instructed to prepare and it is not just the mega wealthy that are looking to protect their positions.

Pre-nuptial agreements – why, when and how

Increasingly, younger couples are seeking to dictate what will happen should their marriage break down. As a family solicitor, it’s an area of law that requires a certain degree of sensitivity. On the one hand, you need to protect your client (you can only act for one party). On the other hand, you are dealing with two people who should be heading to one of the most joyful events of their lives, and you do not therefore want the negotiations to become acrimonious.

I find there is a lot of confusion surrounding pre-nups and this blog looks to answer some of the questions I am often asked:

What is a pre-nuptial agreement?

Essentially it is a written contract entered into by two parties prior to a marriage that seeks to dictate what will happen if they divorce in due course. Such agreements are intended to satisfy (and likely limit) any claims that might otherwise be available upon divorce. So, the agreement will usually dictate what capital and income provision should be made to the parties, and there may be specific provision to protect certain assets being bought to the marriage by one party, or that are expected to be inherited or received by them in the near future.

The agreement can also address other non-financial issues, such as who any children will live with, which school they will go to etc.

In addition to pre-nuptial agreements, once married, it is possible to enter into a “post-nuptial agreement”. This might be to vary an earlier pre-nuptial agreement, to reflect a change in circumstances, or where parties are concerned about a future separation and wish to have some certainty over what will happen.

Who needs one?

In essence, anyone who hopes to have a greater level of certainty over what will happen when they separate or wishes to protect certain assets.

An example of the types of clients we receive instructions from are:

  • 2nd marriages, where the parties want to protect pre-acquired assets for their children from previous marriages;
  • Where one party has very wealthy parents, or is very wealthy in their own right and wants to protect current or future assets;
  • Where both parties are very wealthy and wish to simply retain what they bring to the marriage and avoid future litigation;
  • Conversely, where one party is comfortable rather than wealthy and the other party has limited or no resources and the person with some resources wishes to protect them.

Is it legally binding?

In many jurisdictions, pre-nuptial agreements are automatically recognised as a matter of law and often they are common practice. This is not the case in England and Wales, where they are not automatically legally binding. However, case law has evolved over the last few decades and in particular since 2010. Based on the present case law, you would be unwise to enter into an agreement that you do not expect to be held to.

One of the key components of financial remedy proceedings (which decide financial issues between parties on divorce) is that the court has a discretion in determining how to divide assets. The same applies to the weight that is attached to a pre-nuptial agreement. However, whilst the Court does not have to uphold such an agreement, it is likely to do so provided certain criteria have been met:

  • It has been signed in good time before the wedding (usually no less than 28 days)
  • There has been no duress or pressure to sign the agreement;
  • The parties have had full disclosure of each other’s financial position;
  • The agreement is fair, realistic and meets both party’s needs;
  • Each party has had legal advice and understood the terms when signing it.

If all of those criteria have been met, then the court is most likely to place significant weight on the agreement and either uphold it in its entirety or at least to a larger degree.

Do I need legal advice?

It is advisable for both parties to take legal advice in order to give the agreement the best chance of being upheld in the event of divorce and more importantly so both parties fully appreciate the consequences of signing up to a pre-nuptial agreement. Often clients are surprised by how much detail is included in the pre-nuptial agreement, and that often we will look to future proof an agreement, looking to address for example what will change if there are children in the future. Bearing in mind that a court on divorce will ultimately want to ensure fairness and that needs are met, this is an important but difficult exercise but one that can pay dividends in the future and may avoid changes being made to the terms of the original agreement if one party tries to revisit it on divorce.

Overall, done properly a pre-nuptial agreement is a worthwhile exercise but one to be done with caution and consideration.

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