A prenuptial agreement (also known as a pre-nup), is a formal written agreement between two people prior to a marriage or a civil partnership. It sets out clearly the couple’s ownership of property, assets, and money. It covers how it will be divided and shared in the event of a break-up.
The law on Pre-nuptials
Pre-nuptials are not legally binding currently in England and Wales. However, the courts in a landmark case (Radmacher v Granatino October 2010), has meant that judges are more likely to give them consideration and weight. In this case, there was an agreement which stated that both parties would fore-go any interests in each other’s properties bought before or during the marriage. The husband (French banker) and wife (wealthy German national), divorced after 9 years with 2 children. The husband wanted to claim ancillary relief against the wife’s assets. The Court upheld the agreement, saying that the husband had entered into this agreement without coercion and of his own free will, being fully aware of the terms.
There are particular points which would be favourable to the parties, if a pre-nup is to be upheld at the time of divorce. In no particular order, a pre-nup:
- Must be signed at least 21 days before the wedding
- Should be properly drafted by a family lawyer with both parties receiving independent legal advice
- Must ensure both parties provide full financial disclosure of assets, money and property.
- Has to be within the date (21 days before wedding), and should be up for review taking into consideration future children
- Contents must be reasonable.
It is understandable why the courts sometimes tread carefully with Pre-nups. There might be unfair financial hardship caused to one party, for example where there was non-disclosure and coercion that puts one party at a disadvantage, in the drafting of the document. The courts will use their discretion, taking each case on its own merit.
Why You Should Have a Pre-nuptial Agreement
It would be prudent to have a Pre-nuptial Agreement. It will provide peace of mind for both parties. Pre-nuptials are for everyone, not just celebrities. You should always seek sound legal and independent advice on such matters. Here are some reasons why you might have a Pre-nup:
- You have property or assets that would be very hard to split in half
- You want to protect assets for children from a previous marriage, and you want to ensure their inheritance rights are safe.
- You want to protect your future inheritance
- Both parties have businesses they are keen to protect
- Your spouse to be has an outstanding debt and you want to opt out of being liable
The above list are all valid and understandable reasons for wanting a Pre-nup. If you and your partner love each other, there’s no reason why a pre-nup option cannot be something done in a caring, reasonable, transparent and respectful manner.
If you are already married and you want a contract in place, in the event of a divorce, you can get a Post-nuptial agreement. It is similar to a Pre-nup, but one that happens after the marriage or civil partnership has taken place. Post-nuptials have become more popular in recent years, as they can minimise the risk of severe financial loss. Two of the main concerns for wanting a Post-nuptial are: 1) minimising the cost of divorce or ending of civil partnership and 2) the high rate of couples marrying in later life, means that in most cases wealth have been accumulated prior to marriage. For these reasons and more, couples will want to protect their wealth.
A post-nup is drawn up in a similar fashion as a Pre-nup. It is a contract that must be done having had independent legal advice. It is made with full disclosure of assets and financial resources and how they will be split in the event the relationship ends.
Is a Post-nuptial Legally Binding?
The Privy Council case – Macleod v Macleod (2008) has ruled that the Post-nuptial agreed and signed in 2002 was legally binding on the parties. Whilst there is no legislation from Parliament to ensure the full force of the law on such matters, this case does give significant weight to Post-nuptials. Of course, the courts still have to use their discretionary powers based on how the contract was drawn up and the circumstances of the couples in question. It will consider the length of the marriage and the couple’s financial contributions made during the marriage.
A fundamental aspect of a Post-nup contract, is that a couple can ask the court to make a “consent order” which will divide their property, investments, pensions and any financial resources. This will be based on the terms of their agreement. A Post-nup must be drafted properly in full transparency and reasonableness, for the courts to give it significant weight.
Both parties must be honest and open as to your assets and finances. A failure to disclose can render the agreement unenforceable.
What Should You Include in Your Post-nuptial Agreement
Typically a Post-nuptial should include the following:
- Assets, Financial Resources
- Outstanding debts
- Income and any expectant inheritance
- Any future gains or income
- Maintenance amount to be paid to ex-partner
- List of a couple’s jointly owned belongings
- Second homes and other properties
- Any Wills already in place and/or future ones that need consideration
- Any life insurance policies
As a couple, you must instruct two different solicitors from different firms to avoid a conflict of interest. A Post-nuptial can be amended to match your changing circumstances. Of course both you and your partner will have to agree and follow the process as set out above in good faith.