I am often asked if prenuptial agreements are legally binding.
If one person has worked hard to accumulate assets before meeting their partner, or are perhaps remarrying after a divorce it is not unusual for them to agree with their new partner that it is fair for these pre-acquired assets to be put to one side in the event of a separation and only to divide the things that have been accumulated while they have been together.
Other examples include people who have perhaps inherited money or assets and would wish for their granny’s house, for example, to stay in the family, or young high-flying professionals or sportspeople who have a large surplus in assets or income and would like to try and have some certainty as to what would happen in the event of a separation by reaching a fair agreement beforehand which meets both parties’ needs.
Occasionally I am asked if one person can just leave the other person with nothing and I would say that unless the marriage is very short indeed and there are no children, it is very unlikely that any court would uphold a prenuptial agreement where one party walks away with all of the assets and the other with nothing.
We advise our clients that the prenuptial agreement should be fair and reasonable and that if possible it should be within the range of orders a court would actually make in the event of a separation, as this has a far better chance of being followed by a court and of course of being agreed in the first place. If a court finds that the agreement is totally unfair, then even if the parties have complied with the requirements set out below, it will mean that the prenuptial agreement is not followed by the court as the Judges have a very wide discretion to make an order that meets the parties’ needs, irrespective of whether one party brought the majority of the assets to the marriage.
This in part answers the question of whether prenuptial agreements are legally binding. The court is not bound to follow a prenuptial agreement to the letter. However under the Matrimonial Causes Act 1973, which is the Act that determines who receives what in a divorce, there are many factors for a court to consider when making decisions. The most relevant factors to prenuptial agreements are those of the ‘conduct’ of the parties and the catch-all ‘all the circumstances of the case’. The court cannot therefore just ignore the prenuptial agreement, and must consider the fact that the parties have chosen to sign it. After this, it is up to the court to decide how much weight will be placed on the prenuptial agreement.
There are steps that can be taken to try and persuade a court to place as much weight as possible on a prenuptial agreement. In the absence of an act of parliament, we are guided by the Law Commission Report ‘Matrimonial Property, Needs and Agreements’ (2014) which sets out what the Law Commission believes should form the basis of a ‘qualifying’ agreement as follows:
Formation: A statement within the agreement that each party understands what they are signing, that it signed ‘as a deed’ i.e. in front of a witness, among other formalities, and that it is governed by the laws of England and Wales.
Timing: That the agreement is made (signed and finalised) more than 28 days before the wedding takes place. This is mainly to avoid last minute pressures on either party.
Disclosure: This means the parties telling one another the extent of their assets, income, liabilities and pensions. Essentially it covers information ‘material’ to the decision by the other party to enter into the terms in the agreement. It is to avoid arguments of ‘if I knew that was your financial position, I would never have signed’.
Advice requirement: The parties should each receive advice from a qualified lawyer as to the effect of the whole agreement.
Validity requirement: It must be a valid and enforceable contract.
Variation requirement: If the parties ‘vary’ (change) the agreement then all the above requirements must be met again at the point it is changed. If the parties have children, or perhaps if they retire for example, then the agreement should be reviewed at that point to make sure it is still fair, and if necessary it can be changed. This is because a huge change in circumstances might persuade a court that the agreement should not be followed after-all.
What is for certain is that my clients hope that their prenuptial agreement, once agreed and signed, will be put away and never looked at again. The terms are negotiated amicably as of course the parties are in love and are very keen for the arrangements to be made as quickly and smoothly as possible. I view it as a type of insurance policy, as while we all hope that it is never used, it can provide some protection for the future and is really the only way possible to try and have some control over what could happen with the assets in the unfortunate event that there is a separation in the future. You really should be able to have a frank conversation with the person you love about what your plans are, and although it is sometimes considered crude to talk about money, it is far worse to argue about it when you are already in the painful position of separating.
As mentioned above, I think that in the right circumstances, the pre-nuptial agreements are as helpful and essential as an insurance policy or a will, and with good legal advice parties can agree matters and then get on with planning their wedding!
Lorraine Watts is an Associate of Wendy Hopkins Family Law Practice, Cardiff.
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