29th July, 2013
A pre-nuptial agreement is an agreement entered into by a couple before they marry to formalise arrangements relating to their finances should the parties separate.
A post-nuptial agreement is when the agreement is made after marriage takes place.
Pre/ post nuptial agreements, like wills, allow for plans to be made should the worst happen and are entered into in the hope of knowing what the parties intend to happen with their assets and to save the time and expense of negotiation during divorce.
The Current Law
The law surrounding pre/post nuptial agreements in England and Wales has been in a state of flux for many years. As things stand, pre/post nuptial agreements are not legally binding in England and Wales and cannot overrule the jurisdiction of the Court; however recent case law has given guidance on circumstances where the Court may uphold the agreement. The decision in Radmacher v Granatino (2010) (link to article) can be summarised as follows;
• The rule of public policy ‘pre-nuptial agreements are void because they anticipate a future separation’, is obsolete and should be swept away
• No distinction should be drawn between the legal treatment of pre and post nuptial agreements
• Pre/post nuptial agreements still cannot exclude the jurisdiction of the Court
• However, the Court should give effect to a pre/post 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.
What is regarded as “fair” is left to the discretion of the Court and therefore cases will be decided by judges on a case by case basis.
The UK Government Law Commission has published a consultation paper entitled “Marital Property Agreement which recommends formalities that should be considered when making a Pre/ Post Nuptial Agreement”. The formalities will affect the Court’s view as to whether the agreement is “fair”. The agreement should be in writing, intended to be binding by the parties, signed by both parties and be entered into;
• under usual contractual requirements (i.e. that there is no duress, fraud, misrepresentation, undue pressure or exploitation of a dominant position)
• following exchange of full financial disclosure by the parties before signing the agreement
• following the parties taking independent legal advice
• at least three weeks before the marriage (In the case of pre-nuptial agreements) takes place (hence advice should be sought long in advance to allow time for the above).
Given that circumstances change, and given that the law is in a current state of flux, advice should be taken as to whether any changes may affect the validity of an agreement. It is therefore advisable to regularly review and update the agreement.
Marital agreements may be advisable for individuals wishing to organise their assets and affairs. Agreements such as these have the benefit of the following:
• Definition and preservation of existing individual wealth or family wealth – both now (such as defining pre-marital assets to be retained) or in the future (such as gifts or inheritance received and to be retained)
• The quest for certainty – definition and clarity as to what assets are to be dealt with and in what way. For international individuals, the agreement can also include a clause to determine which country a divorce would be issued in
• Autonomy and individual liberty – the agreements allow for freedom of contract and negation between the parties
• Flexibility – the agreements can meet the needs of the parties as they require rather than reliance upon dated legislation
• Transparency – the agreements are open documents to be negotiated upon between the parties and require the parties to be open and frank about their respective financial positions, avoiding any surprises which regularly appear in divorce
• Evidence of contributions – the agreements can define the contributions brought by the individuals and their intentions upon divorce. If the matter became litigious this may be significant evidence in future proceedings.
For more information on this and other family and matrimonial matters please contact Chris Longbottom on 01244 405415 or email [email protected]ronandpartners.com
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