Valentine's Day news - Fancy a Prenup?
What’s your view on a Pre Nup? Some consider them to be wholly unromantic. Others see them as an essential - protecting the wealthier party from the claims of a future spouse in the event of divorce. Whatever your views, the story is likely to be in the news soon when the Law Commission is expected to publish its report on pre-nuptial agreements. The consultation for this took place 3 years ago but the ambit of the report was then widened because they have become such an important issue in family law. The report may well make recommendations regarding the law on pre-nups. It's important to remember that nothing will change unless the government takes action to change the law relating to pre-nups. In this piece, we are focusing on pre-nuptial agreements and the current legal position to answer some essential questions.
What is a PreNup
It is a formal agreement entered into by a couple before a marriage or civil partnership setting out who owns what and how the couple envisage that the assets might be divided in the event of the relationship permanently breaking down.
Are they legal?
The short answer to this question is no, but as with many things in the world of family law it’s more complicated than that. Pre-nups are not automatically legally binding in this country (unlike in other parts of the world such as Australia, Canada, Germany and France - although certain restrictions apply in Germany and France). However, there have been court cases when pre-nups have been upheld by the courts. The most significant recent case regarding a pre-nup was the case of Radmacher v Granatino in 2010. In this case the husband was French and the wife was German and they entered into a pre-nuptial agreement in Germany.
They then subsequently came to live in the UK. On their divorce, the case past to the Court of Appeal and then the Supreme Court. The Supreme Court ruled that as a general principle pre-nups in England and Wales could and should be upheld by the courts in England and Wales provided that:
1. It would not be unfair to do so. Each party's needs must be provided for. This is especially the case for any children involved. If the agreement were to prejudice the needs of any child then it's likely it would not be upheld by a court.
2. Both parties had had legal advice on the pre-nuptial agreement prior to signing it. This would usually include an exercise in each party disclosing their financial means to ensure the agreement was being signed by everyone in full knowledge of the facts.
3. The agreement must be freely entered into by both parties. If either party was pressured into signing the agreement (for example asked to sign the agreement on the eve of the wedding and told it would not go ahead unless they signed) then it's likely the agreement would not be upheld.
Do you need one?
Statistics tell us that for 39% of people marrying will end in divorce. Every case is different however. Yours may be a first marriage, you are young and you and your intended spouse have the same financial standing and envisage having a family. A prenup may not be for you. If you are a second time around spouse, perhaps in your later years, and you have some assets whereas your spouse may not, you may need to think about this.
It can be (but is certainly not exclusively) the case that parties entering into second marriages (or civil partnerships) contemplate pre-nups. Where both parties have children from previous marriages or relationships that they wish to leave assets to, then they should consider a pre-nup. In the event of the breakdown of a marriage there can be a dispute as to what is a fair settlement over the finances. It could potentially mean that assets that you had before your marriage may be awarded to your spouse. This could then mean that you would not be able to make the same level of financial provision for any children in your will. It is important that anybody contemplating marriage knows what the financial outcome might be if the marriage were to sadly break down.
Want a prenup – what should you do?
Get some good, sensible and practical legal advice on the issue. We are always happy to have an initial meeting to explore whether it might be a sensible idea so please give us a call. If it seems like this would be a sensible idea then the next step will be to discuss this with your future spouse to work out what arrangements you both think would be fair. If you are unsure then this can be done collaboratively with the assistance of solicitors, or in mediation.
Already married! Is it too late?
No, it is not too late. You can enter into a post-nuptial agreement. These work in exactly the same way as pre-nuptial agreements but are entered into after the marriage rather than before. Please get in touch if you think that having such an agreement might benefit you.
Isn't having a pre-nuptial agreement terribly unromantic?
Life is full of many unromantic things such as life assurance, car insurance and buildings and contents insurance - but it doesn't mean that they are not a good idea! It is clearly a good idea to discuss with your future spouse how you will organize your finances together and what each of your views are on issues that may crop up during married life. Having a pre-nuptial agreement is simply an extension of those conversations in that you both commit your intentions to a formal document. It is similar to an insurance policy (for example everyone hopes they will have a wonderful, trouble-free holiday, but taking out travel insurance to assist in the event of illness or theft is sensible) and will only be required in the event that the marriage sadly breaks down.
We're always happy to talk and explore ideas with you, so do get in touch.
14 February 2014