Common Pre-Nuptial Agreement Questions: What You Should Know

1. What is a Pre-Nuptial Agreement or a ‘Pre-Nup’?

A Pre-Nuptial Agreement, is an agreement between the parties to an intended marriage or civil partnership that sets out how their finances will be dealt with in the event that the marriage is dissolved. Although not strictly speaking legally binding, if a Pre-Nup meets certain criteria then it is likely to be upheld by the court.

On a divorce or dissolution of a civil partnership or marriage, the court has discretion to make an award based upon certain criteria laid down in statute.  The court will firstly identify the assets, secondly value those assets and thirdly will consider how to divide them.  The intention of a Pre-Nup is for the parties to agree between themselves how their financial affairs should be regulated in the event of a divorce or dissolution, rather than leaving it to the courts to determine.

The aim of a Pre-Nup is for a couple to consider in advance of marriage what they consider tobe fair in the event of a relationship breakdown.  It is often easier to consider and negotiate such matters when a couple are together and united than it is when a relationship has broken down.  A well-drafted Pre-Nup can offer certainty and transparency from the outset and can make a separation less costly and less acrimonious.

2. Are Pre-Nups legally Binding in the UK and is it worth obtaining one?

Pre-Nuptial Agreements are not currently enforceable as a contract in the UK as the Court’s discretion cannot be ousted.  If an agreement does not meet the necessary criteria of fairness then the court has the ability to consider the relevant statutory factors and exercise their discretion on how the marital assets should be divided.. However, the Supreme Court case of Radmacher v Granatino in 2010 established that, “the court should give effect to a 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 the agreement.”  

3. What is a fair agreement?

In order for an agreement to be regarded as fair it is advisable that:-

• Both parties seek independent legal advice;
• Both parties disclose their financial position to the other party;
• The terms are fair and provide for the parties’ needs to be met;
• Neither were under any undue pressure to sign up to the Pre-Nuptial Agreement;
• The agreement is signed at least 21 days (and ideally more) before the wedding ceremony;
• There has been no relevant fraud or misrepresentation; and
• The agreement is properly formalised and recorded by being executed as a Deed.

There are three aspects to be considered in assessing whether an agreement is fair: needs, compensation and sharing.  If a Pre-Nup seeks to distribute assets and income in a manner that a Court might have dealt with the assets and income then it is likely that the agreement will be upheld.  An agreement will be fair if it is freely entered into, the parties understand fully the implications of the agreement and it is fair to them both in the circumstances that exist at separation.  A Pre-Nup is likely to be considered unfair and departed from if the effect of the agreement would leave one party in a predicament of real need.

4. Is it possible to retract from a Pre-Nup?

A Pre-Nuptial Agreement should only be entered into if a party intends to be bound by it.  The old adage that a Pre-Nup is “not worth the paper it is written on” is outdated and no longer applies.  It is possible to review the terms of a Pre-Nup, either at a point specified for review or by mutual agreement.

5. Who might consider a Pre-Nup?

Once considered the preserve of the wealthy, Pre-Nups have significantly grown in popularity in recent years.  Many couples now marry later in life and a Pre-Nup may offer a way to protect assets that they have built up prior to the marriage.  A Pre-Nuptial Agreement may seek to:-

• Ring fence debt incurred by one party;
• Protect assets built up prior to marriage;
• Protect an inheritance already received by excluding it from the matrimonial pot;
• Protect a business that is in existence;
• Protect trust assets;
• Protect land or other assets due to be inherited that are generational and to be passed down through a family line.

6. Can I protect overseas assets with a Pre-Nup?

It is not possible to have a global agreement which would be enforceable worldwide.  Matrimonial laws vary between jurisdictions and specialist advice is required if a Pre-Nuptial Agreement seeks to be enforceable in more than one jurisdiction.    It will be necessary to consider at the outset:-

• The domicile of both parties to the marriage;
• Where the parties reside;
• The location of any existing assets and property; and
• Countries where the parties may expect to reside in future.

Typically, a Pre-Nup will be drafted in accordance with the rules of the jurisdiction where the parties intend to reside after the marriage or civil partnership.  If the parties have strong ties to another country then it will be necessary to seek specialist family law advice in the other jurisdiction to consider enforceability of the agreement.  It will usually be necessary to have a mirror agreement reflecting the terms of the Pre-Nup in the other jurisdiction.

7. What are the advantages of a Pre-Nup?

• Certainty as to what will happen in the event of a separation (provided the criteria referred to above are met);
• Transparency from the outset as to what will happen if the marriage no longer subsists;
• Costs savings in the event that the parties separate and agree to abide by the Pre-Nup;
• Asset protection;
• Minimises acrimony on divorce; and
• Autonomy to reach your own terms.

8. And the disadvantages?

• Under the current law the English Court will always retain jurisdiction. If one party does not accept that the Pre-Nup should stand then the matter will have to go to court for a determination and legal costs will be incurred;
• Negotiating a Pre-Nup will incur legal costs that may be wasted if the marriage endures; and
• Circumstances can change and may render an agreement that was ostensibly “fair” at the point of signing, unfair in the circumstances prevailing at the point of separation. For example, if a party was suffering from a disability that had not been anticipated at the time of negotiating the Pre-Nup.

For further information, please contact Kelly Gerrard, Legal Director respectively in the Family Department or your usual contact in the Family Department or, alternatively, telephone on 020 7465 4300.