Prenuptial agreements (also known as premarital agreements) can sometimes be considered unromantic but can be extremely important to protect your assets in the event of the breakdown of your relationship. Likewise, a postnuptial agreement to protect assets acquired during the course of a marriage. Our experienced solicitors can guide you through the process.
At the beginning of, or during, your relationship discussions concerning what would happen should matters break down may be difficult to discuss. However, giving thought to such issues at the outset is both a sensible and pragmatic way of protecting yourself for the future, particularly where there may be an imbalance of assets now or anticipated in the future, or you have monies you would wish to ring-fence from a previous relationship.
Should things go wrong, you will have a clear idea of where you stand and there is a documented account of your intentions at the time you married.
Legal status in England and Wales
Prenuptial and postnuptial agreements are not legally binding in England and Wales as this would require a legislative change. However, they are persuasive evidence in financial proceedings, especially if certain safeguards are adhered to.
The Supreme Court case of Radmacher shifted the balance so that it is extremely likely in the future a prenuptial agreement will be upheld by a court unless it can be shown that doing so would be unfair to the other party in the circumstances at the time of the divorce.
The Law Commission has also reported on prenuptial agreements and recommended that they should be largely upheld provided that they meet the needs of both parties.
The safeguards that should be adhered to can be summarised as:
- The agreement meets contract law criteria (no fraud, undue influence or misrepresentation);
- the agreement is signed as a deed no less than 28 days before the wedding;
- Both parties must have been informed of its implications, appreciated those implications and considered (and ideally sought) legal advice;
- Both parties have made full disclosure of their assets and resources.
Legal status in Scotland
Prenuptial agreements are treated differently in Scotland and are considered legally binding.
Prenuptial agreements have been used in Scotland for centuries. They have a long history in Scotland and have always been recognised as valid agreements. They have been used in Scotland since the Middle Ages to regulate financial arrangements during marriage and on divorce.
Validity of prenuptial agreements in Scotland
Prenuptial agreements have been recognised as valid in Scottish courts for some time and provided they are prepared and signed properly, they will be recognised and deemed valid in the event of any divorce. The Family Law (Scotland) Act 1985 specifically recognises that the parties to a marriage might have already reached an agreement pre-marriage or during their marriage.
The court is required to take into account any agreement when deciding if they should make any financial order in the divorce. The courts in Scotland are unlikely to interfere with the arrangement set out in an agreement unless there is a very good reason to do so, such as the agreement not being entered into fairly or with the appropriate capacity.
The test for challenging the validity of any agreement in Scotland is a high one. Provided the agreement has been entered into openly and without coercion, it is very difficult to overcome that hurdle. Accordingly, a well-drafted prenuptial agreement will provide considerable protection and financial certainty for any person going into a marriage.
Who should consider a prenuptial agreement?
Prenuptial agreements 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, those with a stake in a family business, and those entering into second marriages.
Equally, those who have received an inheritance (be it large or small) may feel that this money should be considered separately to matrimonial assets.
It may 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.
How to structure a prenuptial agreement
A prenuptial agreement is intended to set out the couple's agreed decision about what should happen to their assets if they get divorced. They can be as in-depth as the couple requires.
They can cover everything down to the last detail, including who will keep specific items of furniture and how much child maintenance should be paid (even if the couple do not have children yet). For other couples, an agreement might simply record that one party's share of inherited property is to be treated separately in the event of a divorce, but the split of all other assets will be decided upon if and when needed.
A couple may understandably not always be in a position to predict what they will have at the point of a hypothetical divorce. In those cases, prenuptial agreements often record principles. For example, a couple may choose to agree that all property bought in joint names during the marriage will be shared equally. Review clauses can also be used so the agreement is reconsidered at the date of significant events, such as at the birth of a child.
Although many agreements are entered into prior to marriage (prenuptial agreements), postnuptial agreements (those entered into after marriage) are equally effective.
International marriages and prenuptial and postnuptial agreements
Different countries will take different approaches to prenuptial and postnuptial agreements and it should not be assumed that an English or Scottish court will uphold a German agreement or vice versa.
A couple from different countries, planning to live abroad, or with assets held overseas may need a prenuptial agreement in more than one jurisdiction and in more than one language. We can guide you.
A prenuptial and subsequently post nuptial agreement must keep pace with any changes in the parties' circumstances, and regular reviews, whether formally or informally undertaken, should take place.
Even though some cases successfully challenge prenuptial and postnuptial agreements, in full or in part, and so there is no absolute guarantee of success, these agreements are a powerful tool in limiting claims on divorce, even if it cannot be guaranteed that the claims will be limited precisely along the same terms as provided for in that agreement.