Prenuptial agreements have seen a rise in popularity, particularly in more recent times and in marriages between spouses of different nationalities. Traditionally, these documents were not enforceable in England and Wales. However, with the development of case law and the 2014 Law Commission Report on Matrimonial Property, Needs and Agreements, these agreements are being increasingly used in England and Wales.
What is a prenuptial agreement?
There are two types of nuptial agreements. Prenuptial agreements (entered into before saying “I do”) and postnuptial agreements (made after the marriage). These agreements are made between a couple regarding their respective property and support rights in the event of death (in combination with wills) or divorce. Sometimes, a nuptial agreement will also deal with property rights during the marriage (e.g. setting out how property is owned and used, including any distribution of rent/dividends etc).
What is the purpose of a prenuptial agreement?
A prenuptial agreement is usually used to protect the interests of a spouse who has (or is about to acquire by way of a contract, inheritance, gift or other means) substantial assets, such as those with businesses or property. While these agreements are usually to the benefit of one of the spouses in particular (usually the wealthier party), they can aim to protect both parties (as both parties may have pre-marital assets to protect).
Prenuptial agreements are common in many second (or third, or fourth) marriages after assets have been acquired (or reduced) due to a previous divorce or death (once bitten, twice shy).
It can be seen as similar to taking out an insurance policy (although it’s a legal agreement and not insurance). You don’t expect your home to burn to the ground, but you protect against that with buildings insurance. You don’t expect a relationship breakdown, but you may wish to protect against financial claims by way of a prenuptial agreement.
Pros of a prenuptial agreement
Like other non-compulsory legal agreements, there are a number of pros and cons to think about when considering whether to enter into a prenuptial agreement.
- They can protect assets from being shared/dealt with upon death or divorce. The aim is to prevent certain identified assets from being considered by the court, sold or transferred within any future proceedings.
- They can set out what is “matrimonial” (assets accrued during the marriage which might be shared) and what is not to prevent arguments and signpost the intentions of the parties.
- They can protect assets belonging to one party from being used to satisfy the debts of the other.
- They provide a level of clarity and transparency in respect of financial matters prior to the marriage (so you both go into the marriage with your eyes wide open and aware of your respective financial positions).
- They can provide some level of certainty on relationship breakdown, as it’s already been agreed who should have what. This can mean saving on future legal costs.
- They are a clear record of discussions and agreements at the time of the document, which can be useful down the line when recollections may be inaccurate and parties are in conflict.
- They can be a useful tool for any future negotiations, as they may signify the priorities of each party.
- They enable parties to have the autonomy to make their own decisions in respect of how their assets, pensions and incomes should be dealt with, including how they would like matters to be determined if there is disagreement in the future (such as arbitration or mediation).
- They have to be taken in to account by the court. As long as the agreement was properly arrived at and remains fair, the court should follow it.
Cons of a prenuptial agreement
- They don’t prevent either party from applying to the court for financial provision on divorce.
- They do not prevent the court from making financial orders.
- They can disadvantage the financially weaker party.
- They may need to be kept under regular review to ensure that they remain fit for purpose (incurring future legal costs).
- They may be less effective if there are significant changes in financial circumstances (such as the birth of children, significant inheritances, significant promotions etc).
- It’s sometimes difficult to negotiate what can be seen as a clinical legal document in the run up to the happy day.
- They may lead to an earlier relationship breakdown – for example, if one party has not been transparent about financial circumstances or does not wish to enter into the agreement. However, some would say that this is also a pro, as it may prevent parties from entering into a marriage which is likely to encounter significant difficulties.
- In the case of life-long and successful marriages, the document may not be used.
Are prenuptial agreements strictly enforceable?
The court is not strictly bound by a prenuptial agreement when making orders on divorce. However, the existence of a pre or postnuptial agreement is a fact that any judge will need to take into consideration. If the agreements achieve fairness and are executed in accordance with the Law Commission and Law Society guidance, the courts are likely to be persuaded to uphold them.
Should I hold off and get a postnup later if I need it?
The disadvantage of postnuptial agreements versus prenuptial agreements is that they take place after the marriage. This means that if one party refuses to enter into the agreement, you are already married and financial claims may already be available (versus having protection before the marriage or potentially deciding not to move forward with the marriage without a prenuptial agreement).
Having the best document – what to include in a prenuptial agreement
If you are seeking the best agreement, when entering into a pre or postnuptial agreement, you should ensure that:
- There has been transparency and disclosure of both parties’ respective financial positions.
- The document is contractually valid (no fraud, duress, undue pressure or misrepresentation).
- Both parties have the benefit of legal advice.
- It’s intended to be a binding agreement.
- The terms of the agreement are not fundamentally unfair (and will meet needs in consideration of Section 25 of the Matrimonial Causes Act 1973).
- It confirms the intended jurisdiction for proceedings.
- It is executed as a deed (in the presence of a witness). This is a technical legal point in relation to the type and execution of a document.
- The prenup is executed no later than 28 days prior to the marriage.
- It’s reviewed on a relatively regular basis (for example, every five years) or in the event of any significant changes to the circumstances.
Where agreements are made in accordance with this guidance and meet both parties’ reasonable needs (and those of any relevant children), your prenup will be a very persuasive document.
Ultimately of course, the hope is that your prenuptial agreement never has to be relied upon. But the certainty of knowing that it’s there can be reassuring. For that reason, for those with substantial assets in particular, it’s well worth considering and taking legal advice at an early stage.
Visit our prenuptial and postnuptial agreements page on our website for more information and contact details of our experts.
As featured in Muddy Stilettos : The great pre-nup dilemna – Can you afford to be without one?