Prenuptial and postnuptial agreements — protecting wealth on divorce and dissolution in England & Wales and overseas

What is a prenuptial agreement?

A prenuptial agreement is an agreement that a couple enter into before they marry or civilly partner, and it sets out how resources and assets would be split if the relationship ends.

A prenup can be used to predetermine the outcome of a divorce settlement, taking away the stress, uncertainty and cost of a court dealing with it if there were a divorce.

A prenup is often used as a way to safeguard or ringfence certain assets to protect them from future claims if there were a divorce. Prenups are therefore commonly used if there is a wealth imbalance between the parties.

What is a postnuptial agreement?

A postnuptial agreement, sometimes known as a postnup or post-marital agreement, is an agreement entered into by the parties of a marriage or civil partnership.

Like a prenuptial agreement, a postnuptial agreement sets out how resources and assets would be split in the event of a relationship ending.

The growing popularity of pre and postnuptial agreements

As entering a pre or postnuptial agreement is a highly confidential and personal decision, it is impossible to accurately gauge the volume of agreements being signed. They will often contain strict confidentiality clauses preventing the contents of the agreement from being disclosed without the other person’s permission.

However, family lawyers across England and Wales have reported a significant increase in the number of people seeking advice and entering into prenuptial agreements since the Supreme Court heard the case of Radmacher v Granatino in 2010, which found that prenuptial agreements should be given decisive weight in divorce proceedings.

Who tends to use pre and postnuptial agreements?

Prenuptial agreements (often called marital agreements or contracts overseas) are typically associated with celebrities and the super-wealthy, but the reality is quite different. They are growing in popularity with entrepreneurs, people with shares in a limited company, or those with a stake in a family business.

Equally, people who have received an inheritance (be it large or small) may feel that this money should be considered separately from matrimonial assets. Similarly, if they have introduced assets into the relationship over and above those of their partner.

It may also be the protection of future shareholdings or a future windfall that is the motivating factor or ensuring that children from a first marriage do not lose out on their inheritance as a result of a divorce or dissolution.

What should be included in a prenup or postnup?

The aim of a prenuptial or postnuptial agreement is to set out what will happen to both solely and jointly held assets in the event of a relationship breakdown.

Therefore, a prenuptial agreement tends to include clauses about:

• Debts: The prenup can outline who is responsible for pre-marital debts, such as credit card debt or student loans. It can also clarify responsibility for debts accrued during the marriage.
• Property: Prenups frequently include clauses about property, especially regarding the division of the marital home or the retention of separate property.
• Maintenance: Couples can address spousal and child support in a prenup, including whether support will be paid and the amount.
• Pensions: The prenup can define how pension pots will be divided upon separation.
• Inheritance: Clauses can be added to ensure that inheritances remain separate property or are passed down to children from previous relationships.
• Personal property: Couples can specify that certain personal belongings, such as art or jewellery, will not be divided and will remain with the original owner.
• Bank accounts: Prenups can address the handling of joint accounts upon separation and can protect individual income or savings.
• Business interests: For those who own businesses, a prenup can include provisions for dividing business assets and restrict the sale or transfer of these assets.

What can’t be included in a prenup or postnup?

Prenuptial and postnuptial agreements are designed to cover issues relating to finances and property. As such, they should not be used to cover issues such as:

• Child arrangements: Deciding these matters in advance is generally not permitted because family courts prioritise the best interests of the child, which may change over time.
• Financial arrangements for children: The family court retains the jurisdiction to modify any aspect of a prenuptial agreement that relates to financial support of children to ensure their needs are met.
• Personal matters: Prenuptial agreements should not extend to personal aspects of the relationship. For instance, they should not include:
  • Lifestyle clauses, such as dictating attire or social engagements.
  • Division of household chores or responsibilities.
  • Requirements for religious upbringing.
  • Restrictions on social media usage during or after the marriage (although confidentiality clauses may be considered).
• Illegal or unfair matters: Any provision that violates the law or is deemed unconscionable by a court will not be enforced. Examples might include:
  • Terms that encourage a future divorce, such as promising excessive assets to one party if the marriage ends.
  • Provisions that attempt to completely eliminate or severely limit one spouse's right to financial support in circumstances where doing so is unfair or fails to meet their needs.
  • Clauses that were included through misrepresentation, coercion, duress, or without full financial disclosure.

How to get a prenuptial agreement

To create a prenuptial agreement, you and your partner should each speak with a solicitor specialising in family law. The process includes:

1. Early discussion: Begin well in advance of the wedding.
2. Full financial disclosure: Be transparent about your financial situations.
3. Independent legal advice: Ensure both parties understand the implications of the agreement.
4. Drafting: A solicitor will draft a bespoke agreement.
5. Review and negotiation: Both parties should carefully review and agree on the terms.
6. Signing: The final agreement should be signed with independent witnesses present, at least 28 days before the wedding.

Are prenups and postnups legally enforceable in England & Wales?

Although not legally binding in England & Wales, since the Supreme Court judgment in the case of Radmacher v Granatino in 2010, the law has been developed in the courts such as to provide significant protection to those seeking to protect their assets in either a pre or postnuptial agreement.

Although the courts are not obliged to give effect to the agreement and parties cannot oust the jurisdiction of the court to determine a reasonable and fair settlement, the court must give a pre or postnuptial agreement appropriate weight when exercising its discretion, should there be a divorce or dissolution. This is subject to certain safeguards being put in place when entering into the agreement.

If safeguards are adhered to, the advice given to parties is that they can — and should — expect to be held to the terms of any pre or postnuptial agreement entered into on a future relationship breakdown.

What are those safeguards?

Any agreement should be freely entered into, the parties should fully appreciate the implications of the agreement, and it must not be unfair in the prevailing circumstances at the time of divorce to uphold the agreement.

The Law Commission has also recommended legislative reforms to the Government to put further safeguards in place. The Law Commission is keen to promote certainty and consistency upon divorce, although it recommends that pre and postnups should only be enforceable after the financial ‘needs’ of both parties, and any children, have been met.

It has been proposed that any such agreements have to comply with various conditions before they will be upheld by the court. By way of example, each of the parties would have to be able to demonstrate that prior to entering into the agreement they had:

1. Taken independent legal advice;
2. Provided their spouse with full disclosure of their financial position; and
3. Signed the agreement more than 28 days before the wedding or civil partnership formation.

The Law Commission proposals have been referred to the Ministry of Justice, but we have yet to see whether they will lead to new legislation emerging as a result.

Can prenups and postnups be contested?

Both prenups and postnups can be challenged. Reasons for contesting them might include:

• Lack of full financial disclosure.
• Duress or coercion during signing.
• One party not understanding the agreement.
• Significant changes in circumstances since the prenup was signed, such as the birth of children, which render the arrangements unfair or leave one party in need.

International divorce

With an increasingly mobile and global society, the personal circumstances, backgrounds, living and financial arrangements of many couples may spill over into a number of different places, which may mean that a different legal jurisdiction regulates a future dispute.

If a couple has any connections with other locations around the globe (as close to home as Scotland or Northern Ireland, or on the other side of the world), additional considerations need to be carefully factored into a proposal to enter into a pre or postnuptial agreement.

Expert, and early, advice is needed.

What alternative legal jurisdictions can be foreseen?

A starting point is an examination of the parties’ nationalities and citizenship, together with any future locations where the parties may make their home in the future. The location of business and financial assets, including properties, is also relevant.

Divorce jurisdiction — obtaining legal input from abroad

The legal jurisdiction(s) where a future divorce or dissolution may take place could be determined by numerous factors. Each case is different, and there may be two or multiple options.

It is strongly recommended that legal advice is taken in each potential jurisdiction to identify whether or when a future divorce or dissolution may feature, what that means for the couple, and how that jurisdiction deals with any pre or postnuptial agreements generally. They are often termed marital agreements, marital contracts or marital regimes abroad and each legal jurisdiction is likely to take a different approach.

Would an alternative legal jurisdiction for divorce/dissolution recognise a nuptial agreement drawn up in England and Wales or elsewhere? And how would the English court view an agreement entered into elsewhere?

Again that question needs to be asked and carefully considered by legal counsel in all potential jurisdictions.

For example, in England, a nuptial agreement is not binding in a court, wherever it is prepared, but it may be given considerable weight. The court will weigh up the various issues that we explored in our earlier article. In other jurisdictions, any nuptial agreement might be binding.

Should one agreement be drawn up or should there be mirror documents in the various competing jurisdictions?

Again, each case will be determined by its own facts and the couple involved, but this needs very careful consideration. Should there be a lead document, with legal input from the other jurisdictions included, or should there be a second (or more) document?

Issues such as whether it is possible to ensure that multiple documents are consistent, do not contradict the other, or even override the other, need to be considered.

What are the key features/issues that each potential jurisdiction will consider on divorce/dissolution, and how can they be factored into a nuptial agreement?

As an example, and as we explored in our first article, the English court will review whether a nuptial agreement is fair/meets both parties’ needs.

Other jurisdictions may factor in other considerations. It could be the application of principles, formulas, inheritance laws and marital property regimes.

When drafting, it would be prudent to demonstrate that these multiple issues have been considered and addressed properly by the couple and their advisors in the agreement.

Are there any contractual requirements and formalities that must be met in each potential jurisdiction, and how can they be factored into a nuptial agreement?

Again, using England as an example, the English court will want to ensure that both parties had a full appreciation of the agreement they entered into. It will consider issues such as whether both parties had legal advice, if there was an exchange of financial disclosure and whether contract law principles were properly applied and will want to see reference to that in the agreement.

Again, when drafting, it would be prudent to demonstrate that these issues have been addressed properly by the couple and their advisors.

Are there any cultural or language issues?

These need to be properly considered, including whether translators and translations of advice and/ or legal documents are required.

How is the financial settlement framed?

Once a decision has been made, in collaboration with all the various legal advisors, about which jurisdiction shall lead or where documents should be prepared, there needs to be consideration about the terms of the pre or postnuptial agreement(s).

To ensure consistency and facilitate interpretation by a future court, possibly in an alternative jurisdiction, the key is to try to make the structure as straightforward as possible.

Considerations should include (but are not limited to):

Clear definitions: how should assets to be shared be defined, likewise assets to be ringfenced? If issues such as sharing, needs or compensation are relevant, how are they defined?

Valuations: how will future valuations of assets be dealt with and by whom/where?

Maintenance: is it possible to elect a choice of forum to resolve maintenance issues? Should this be done? Should a formula or quantification of claims be recorded, or should they be resolved based on circumstances at the time of a divorce/dissolution?

Safety net: should there be a ‘safety net’ provision to ensure that needs, or other considerations required by a future court, are factored in?

Choice of law/jurisdiction forum: careful consideration with the various advisors needs to be given to whether it is prudent to elect a jurisdiction or application of a legal framework for a future dispute now.

Choice of dispute resolution forum: consider whether the parties elect to resolve any future issues, if they arise, through non-court methods such as mediation, collaborative law or arbitration, and where.

Security of assets/enforcement of the settlement: do these issues need to be considered too? Where might future proceedings be needed/how effective might any claim for enforcement be?

Death/inheritance regimes: as different jurisdictions apply different rules, some of which may be automatic regimes on death, consideration needs to be given to how this might affect a couple/whether it is prudent to address and record in a nuptial agreement or elsewhere.

Review: should there be a review clause at various points in the future? Is this of value? Any pre or postnuptial agreement, whether or not it contains a review clause, should always be kept under review to keep pace with changing circumstances.

Summary

In England and Wales, pre and post nuptial agreements are a powerful tool in limiting claims on divorce or dissolution, even if it cannot be guaranteed that the claims will be limited precisely along the same terms as provided for in that agreement.

Nuptial agreements with international dimensions are complex and it can take time and resources to work out what the preferable approach is for the couple in question. Early consideration of the issues must be given. Although it may seem a daunting task, it should not be a deterrent, as grappling with potential issues now will serve the parties well if their relationship does falter.

The key ‘take away’ is to appoint the relevant experts, not only in their own jurisdictions but who have experience dealing with international matters too, ensure that they are willing to adopt a collaborative approach with the other professionals involved, and above all, try to keep it straightforward.