WHAT IS A PRENUPTIAL AGREEMENT?
A prenuptial agreement is a written agreement entered into between two parties prior to their marriage. It clarifies the ownership of assets (money, real estate, personal chattels etc.) and how they will be divided in the event of a breakdown of the marriage.
ARE PRENUPS FORMALLY BINDING IN ENGLAND & WALES?
Prenuptial agreements are not formally binding in England & Wales. This is in contrast to other jurisdictions, where prenups are regulated by law and therefore legally binding. Following the case of Radmacher v Granatino in 2010, prenuptial agreements are now allocated more evidential relevance than before by family courts in the UK, unless the court considers the agreement to be unfair.
WHY SHOULD PARTIES CONSIDER GETTING A PRENUPTIAL AGREEMENT DRAFTED?
Prenuptial agreements provide clarity in terms of how assets will be divided. Below are some situations in which parties may consider having a prenuptial agreement drafted:
- There are children from a previous marriage and either party wishes for their inheritance needs to be protected;
- Either or both parties have inherited assets or are expecting to inherit assets;
- Either or both parties have substantial savings;
- Parties wish to clarify how assets will be divided in the case of a breakdown of the marriage;
CHALLENGES TO THE VALIDITY OF A PRENUPTIAL AGREEMENT
The following criteria should be fulfilled in order for a prenuptial agreement to be deemed valid in the face of challenges at a later date:
- In order to comply with UK law, a prenuptial agreement must be drafted by a qualified solicitor;
- Both parties must be represented by separate solicitors in order to avoid any claim of conflict of interest;
- Both parties must fully understand the prenuptial agreement and have agreed to it in the absence of any duress;
- Respective solicitors for both parties must confirm they provided independent legal advice in relation to the prenuptial agreement and having received the same, the parties willingly entered into and signed the agreement;
- The prenuptial agreement must be signed at least 21 days before the marriage is due to take place;
- Full and frank financial disclosure needs to have taken place between both parties prior to signing the agreement.
DEFAULT POSITION IN THE UK WHERE NO PREUPTIAL AGREEMENT IS IN PLACE
The courts in the UK operate from a default position that the roles in the family of ‘economic provider’ and ‘homemaker’ are of equal value to the welfare and stability of the family and neither contribution is more or less important than the other.
It follows that without a pre-nuptial agreement in place, the courts will take the view that the starting point for the division of assets is that there should be an equal split of the assets between both parties.
There are, however, many factors the court takes into consideration when making a decision in ancillary relief proceedings, which include:
- Length of the marriage;
- Age of both parties;
- Earning capacity of both parties;
- Age of the children of the family;
- Requirements and needs of the children of the family and the financial application-making party;
- Length of time until retirement of both parties.
When dealing with financial affairs, it is prudent to be organised at an earlier stage so as to avoid confusion and dissatisfaction at a later date.
The courts in the UK are dealing with prenuptial agreements at an increasing rate and as case law develops, the indication is that judges are willing to abide by the wishes of the parties as recorded in prenuptial agreements as long it has been ascertained that the agreements were freely entered into and are not unfair on either party.