Pre-nuptial Agreements

It is a sad reality that a number of marriages end in divorce.  Whilst no one enters into a marriage expecting the worst to happen, some couples do wish to try and minimise the potential for conflict, should a divorce occur.

We are regularly contacted by individuals who are contemplating entering into a pre-nuptial agreement with their future spouse. When a party has been through a previous divorce they can be anxious to protect their financial position the second time around. Pre-nuptial agreements are also particularly useful where a party wishes to protect their business assets, or any assets which they stand to inherit in the future from family members.

A pre-nuptial agreement will regulate the financial claims arising out of the breakdown of a marriage. It should address all of the potential matrimonial issues, including the position regarding maintenance payments, division of the parties’ pension provision and also the position regarding the ownership of the matrimonial home.

Are pre-nuptial agreements legally binding?

There has been much discussion in the media about whether pre-nuptial agreements are legally binding.   At present, the Court does still have the jurisdiction to vary the terms of a pre-nuptial agreement, and will probably do so if its terms do not meet a party’s financial needs. If, however, the agreement follows certain requirements, meets needs and produces a fair outcome, it is likely that it would be upheld.  In recent cases, the Courts have emphasised the importance of respecting the parties’ individual autonomy, where a pre-nuptial agreement has been properly entered into.

The requirements for a valid pre-nuptial agreement are:

• it must be contractually valid (and be able to withstand challenge – eg on the basis of undue influence or misrepresentation);
• it must be made by Deed and contain a signed statement from both sides that the agreement is a pre-nuptial agreement and that the Court will take account of its contents;
• it must be entered into at least 28 days before the wedding or civil partnership (however, we recommend entering into a pre-nuptial agreement at least two to three months before the intended marriage – the sooner the better!);
• both parties will need to make full and frank disclosure of their personal and financial circumstances before the agreement is executed and both parties must have received independent legal advice before the agreement is formed.

It goes without saying that the contents of a pre-nuptial agreement must generally be fair to both parties and meet their needs and, of course, no undue influence should be put upon either party to agree its contents.

The advantages of a pre-nuptial agreement are:

• a pre-nuptial agreement can save time and costs in the long run;
• they can provide financial security and certainty;
• a pre-nuptial agreement can protect family assets or any assets acquired before the marriage takes place;
• an agreement encourages couples to talk about their financial affairs before they marry.

If a couple has already married, then it is also possible to enter into a post-nuptial agreement regulating the financial position should their marriage break down. The requirements for a valid post-nuptial agreement are similar to those for a pre-nuptial agreement.

Once it is made, is it ‘set in stone’?

It is always a good idea to review a pre-nuptial agreement every few years to ensure that it still reflects the parties’ intentions, meets needs and remains fair.  If children have been born or circumstances change dramatically, the couple may want to review the agreement (and/or convert it into a post-nuptial agreement) to take account of the new situation they find themselves in.  A well drafted pre-nuptial agreement will contain a review clause to cover these eventualities.

What next?

If you think a pre-nuptial agreement may be suitable for you and your partner, you should discuss the general concept of it with them first.  Remember - it needs both parties to be in agreement before it can be signed.

Then call a member of our specialist Family team.  They will be happy to take you through the process, answer any questions you may have and then help to negotiate, draft and finalise the agreement.