What is a pre-nuptial agreement?
A couple planning to enter a marriage or civil partnership may decide to enter into an agreement that shows what they intend to happen to their money and property if the marriage or civil partnership were to end. The legal rules about these agreements come from the usual laws that apply to divorce, and also a decision of the Supreme Court in 2010 (Radmacher v Granatino) where the court said: ‘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 their agreement’.
It is important to note that prenup agreements are still not legally enforceable in England and Wales at least for now. However, following the landmark decision in the case of Radmacher v Granatino in October 2010, judges are attaching more weight to prenup agreements and are more likely to uphold them, unless they are considered to be unfair at the time the parties get a divorce.
In our experience, a prenup agreement is more likely to be upheld if:
- It is signed at least 21 days before the wedding day its contents are reasonable
- It is clearly not out of date (providing for future children, for example, and preferably a review after a period of time)
- It was properly drafted by a family lawyer with both parties receiving independent legal advice and providing full financial disclosure.
How do I create prenup agreement?
When considering if the prenup agreement is fair and should be upheld, the Court will look at things such as whether both parties understood it properly and if they had enough time to review it before signing.
Therefore, when a prenup agreement is created you need to ensure the following:
- To comply with UK law, the prenup must be drawn up by a qualified solicitor
- Both parties must have separate solicitors to avoid any claim of conflict of interest
- All assets must be fully disclosed by both parties
- Both parties must fully understand the agreement
- Both parties must voluntarily agree to it
- Both solicitors must confirm it was entered into freely and knowingly
- The prenup agreement should be signed at least 21 days before the marriage.
What happens if we have children?
A pre-nuptial agreement cannot prejudice the interests of any children in your family. It is common to build in provision for a review of the agreement if and when you have children, so that the children’s needs can be considered and assessed at that time, with possible changes made to any expectations of the adults.
In the event of a divorce, if the court is asked to intervene in financial arrangements its first consideration is always any children involved. If the court considers that an agreement made by the adults may adversely affect their children, for example by restricting any expectations of a lifestyle they would otherwise have had, it is likely to consider that it is not fair to uphold the agreement in the circumstances. It is not possible to contract out of giving financial support to or for a child.
How do international elements affect a pre-nuptial agreement?
Where either you or your proposed spouse, or both of you, have a connection with another country, either as to assets, domicile, habitual residence, or future plans, and you are considering entering into a pre-nuptial agreement, a specialist family lawyer should be instructed in each relevant country to advise you on the need for and effect of such an agreement in that country. Significantly more time and costs are likely to be incurred where there are international aspects. The approach to the enforcement and validity of pre-nuptial agreements varies between countries, and in some countries outside England and Wales a pre-nuptial agreement will be fully binding with no regard to fairness. A pre-nuptial agreement will usually include a ‘jurisdiction clause’, confirming your domicile and habitual residence, together with your intentions as to the jurisdiction in which the divorce or dissolution will proceed, and where you intend the agreement to be enforceable. Where there are international elements, consistent pre-nuptial agreements may be drafted in each relevant jurisdiction, translated and notarised as necessary. Alternatively this can be dealt with by the preparation of one comprehensive agreement which can be translated, if required.
What are the advantages and disadvantages of a pre-nuptial agreement?
A pre-nuptial agreement can give more certainty as to financial arrangements in the event that you divorce, provided the agreement is entered into in accordance with the suggested steps as to legal advice and disclosure, and represents a fair arrangement for both parties. It can be an effective way to protect assets that you may have had prior to the marriage, particularly if you, for example, wish to protect assets for the purpose of an inheritance for any children of a prior marriage or relationship.
However, because the court will always have jurisdiction in the event of a divorce, entering into a pre-nuptial agreement can sometimes provide a false sense of security. If there is a divorce, and you cannot reach agreement as to how finances can be dealt with, and one of you no longer wishes to proceed in accordance with the terms of the pre-nuptial agreement, the issues may need to be determined by the court although where the court considers the pre-nuptial agreement to have been ‘fair’, it may make an order reflecting the terms of the agreement, see: What will happen if one party no longer wishes to be bound by the terms of a pre-nuptial agreement?
There is little advantage in agreeing terms that will be unfair to one party, particularly if that party has been placed under pressure to agree those unfair terms, hasn’t had independent legal advice or doesn’t have sufficient information (financial disclosure) to make an informed decision on whether to enter into the agreement. In those circumstances the court would be unlikely to consider the agreement to be ‘fair’, although there have been cases where all of the recommended steps haven’t been followed but a pre-nuptial agreement has still been upheld by the court. Often this will turn on the extent to which the party who no longer agrees with the terms understood what they were agreeing to.
Circumstances can change, and in the event of a dispute the court will look at your circumstances as they are at the time the agreement is being considered by the court. What may have been fair at the time of the agreement might not be considered fair if your or your spouse’s circumstances have changed significantly, for example you have had children and one of you has a reduced earning capacity, or one of you has suffered ill health, and the agreement hasn’t provided for those changes either in its original form or by an amended agreement. For this reason it is sensible to include provision in the agreement for there to be either regular reviews, or reviews in the event of certain events occurring.
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