Growing Interest In Pre-nuptial Agreements

What is a Pre-nuptial Agreement?

A Pre-nuptial Agreement is a written contract between a couple who plan on marrying or entering into a civil partnership.  It is designed to create financial certainty in the event of marriage or civil partnership breakdown in the hope of reducing costs in arguing over money matters.

Are Pre-nuptial Agreements binding in English law?

Pre-nuptial agreements are not binding under English law but are becoming more and more popular and persuasive. The courts are giving growing importance to the provisions set out in Pre-nuptial agreements and an increasing willingness to consider them along with all the factors set out in the Matrimonial Causes Act 1973 which governs divorce law in England and Wales.

How will the court view a Pre-nuptial Agreement?

When considering making a financial order on divorce or dissolution or considering whether an agreement reached by the parties who are divorcing or dissolving a civil partnership is fair, the court must have regard to the principles set out in section 25 of the Matrimonial Causes Act 1973:

“(1)  It shall be the duty of the court in deciding whether to exercise its powers … to have regard to all the circumstances of the case, first consideration being given to the welfare while a minor of any child of the family who has not attained the age of eighteen.
(2)   As regards the exercise of the powers of the court … the court shall in particular have regard to the following matters

(a)  the income, earning capacity, property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future, including in the case of earning capacity any increase in that capacity which it would in the opinion of the court be reasonable to expect a party to the marriage to take steps to acquire;
(b) the financial needs, obligations and responsibilities, which each of the parties to the marriage has or is likely to have in the foreseeable future;
(c)  The standard of living enjoyed by the family before the breakdown of the marriage;
(d) The age of each party to the marriage and duration of the marriage;
(e) Any physical or mental disability of either of the parties to the marriage;
(f) the contributions which each of the parties has made or is likely in the foreseeable future to make to the welfare of the family, including any contribution by looking after the home or caring for the family;
(g) The conduct of each of the parties, if that conduct is such that it would be in the opinion of the court be inequitable to disregard it;
(h) in the case of proceedings for divorce or nullity of marriage, the value to each of the parties to the marriage of any benefit which, by reason of the dissolution or annulment of the marriage, that party will lose the chance of acquiring.

A Pre-nuptial agreement is a circumstance of the case to which the court will have regard.  The court will not however uphold a pre-nuptial agreement which unfairly prejudices the parties or any child of the family.  The court will look to achieving a fair and equitable outcome.  The court will also have regard for the wishes of the parties as expressed in a pre-nuptial agreement.

Requirements

1. Independent legal advice.  In order for a pre-nuptial agreement to have as much weight with the court as possible, both parties to the agreement should be separately represented by an independent solicitor.  If either of the parties is not represented or the pre-nuptial agreement is badly drafted, it is unlikely to be enforced, particularly if the person who did not get independent legal advice has been or will be prejudiced by the provisions of the pre-nuptial agreement.
2. Disclosure.  Full and frank disclosure of assets and liabilities in England and abroad should be exchanged between the parties, a schedule of which should be attached to the pre-nuptial agreement.  Advice should be sought on the tax implications in connection with the proposed agreement.  If full financial disclosure is not made, it is less likely that the court will uphold the agreement.
3. Children and dependants.  If the pre-nuptial agreement does not acknowledge children from a previous relationship or other dependants and adequate provision is not made for them, it is likely that the court will review the agreement to make such provision.  The pre-nuptial agreement should also be flexible and allow for any changes envisaged in the future, such as children of the marriage or civil partnership.  If the agreement is not flexible, the court will refer to the Section 25 criteria above to achieve fairness in addressing the circumstances of the parties at the time of the breakdown of the relationship.
4. Timing and duress.  A pre-nuptial agreement should be considered carefully and not entered into in haste.  The longer the period between entering into the agreement and the date of the marriage or civil partnership ceremony, the better.  If a pre-nuptial agreement is entered into in haste, allegations may be made later that one party was pressured into the agreement and the court will be less likely to have regard for it.

Why consider entering into a Pre-Nuptial agreement?

Parties may feel that entering into a pre-nuptial agreement questions their commitment to each other.  It is not appropriate for everyone.  However, if there is an imbalance of wealth between the parties or they wish to protect inherited assets, protect and provide for their children of another relationship or indeed protect assets retained from a previous relationship, they should consider entering into a pre-nuptial agreement.

 

If you wish to know more about a pre-nuptial agreement and whether it is appropriate for you, please do not hesitate to contact Elizabeth Bettes, Head of our Family Department.

Published on 24/02/2010