Prenuptial agreements: a brief introduction
As we explain in our page about prenuptial agreements, they can be a useful tool to pre-plan the division of assets upon divorce, by avoiding the conflict and protracted uncertainty that traditional litigious financial remedies procedures can involve.
But with some surprising legal decisions in the last few years, coupled with the Law Commission’s 2014 report, it’s more important than ever to consider whether or not you should sign a prenup, and if you do, how it should be written.
Case law: how does it affect a prenuptial agreement?
The most important recent legal precedent for prenuptial agreements is the 2010 case of Radmacher v Granatino, in which the Supreme Court decided to give the agreement ‘decisive weight’. Essentially, this landmark case develops the law on prenuptial agreements as far as is possible without actual legal reform (and new legislation). In addition to the Law Commission’s recommended reforms to UK matrimonial law, this paves the way for prenups to gain increasing authority in the case of financial settlements, until they may eventually get passed into law.
However, at present, prenuptial and postnuptial agreements are not technically legally binding.
What effect do the Law Commission’s 2014 recommendations have?
The Law Commission’s 2014 report included a draft Nuptial Agreements Bill, which the Law Commission wanted the government to debate and progress through Parliament into legislation. However, the timing of the report meant that the government could issue only an interim response in September 2014, as there was not time before the dissolution of Parliament in May 2015 for the general election for a final response to be submitted or for the bill’s passage through Parliament.
The Law Commission’s draft Nuptial Agreements Bill is therefore the likely route through which prenuptial agreements will be made legally binding in the future, providing that any agreement meets certain requirements. We summarise those requirements here. The requirements include, as well as financial disclosure and legal advice, that an agreement doesn’t seek to contract out of providing for either party’s (and subsequent children’s) needs. Any prenup agreement that seeks to leave either party without the means to meet their ‘financial needs’ will thus be ‘disqualified’ from being upheld, and so referred to the usual court process.
The definition of ‘financial needs’ is something the Law Commission has sought to clarify, because some judges inevitably interpret a party’s financial needs more generously than others, leading to inconsistent application of judicial discretion. Although there’s no statutory definition of financial needs, it largely includes:
- the provision of housing for children and the resident parent, before that of the non-resident parent
- living expenses
- childcare costs
- the costs of re-entering the workforce for either non-working parent (such as retraining costs)
- pension provision
To this end, the Family Justice Council (FJC) produced new guidance in July 2016 on financial needs on divorce for courts and legal advisers. You can read it here. The FJC has also produced guidance, Sorting Out Finances on Divorce, for separating couples to help them better understand the principles of dividing their finances fairly themselves, and what principles a judge would use to decide for them.
What would invalidate a prenuptial agreement?
As the law currently stands, a court would be unlikely to uphold a prenuptial agreement in the UK if:
- It was not written by a qualified solicitor specialising in family law (for example, it may have been written by a solicitor who knew nothing of matrimonial law).
- There was not full financial disclosure by both parties.
- Both or either parties didn’t take independent legal advice.
- Either party was advised by a solicitor not to sign the prenup.
- The party with the most to lose didn’t fully understand the nature of the prenup.
- There was no negotiation of the prenup, only one party imposing the terms on the other.
- Either party was pressured or bullied into signing.
- It was signed less than a month before the wedding.
- It did not account for future changes in the marriage, such as providing for future children.
I signed a prenup that I regret. What can I do?
Even if you have signed a prenup, you can still go to court to settle your finances during your divorce proceedings. It’s important to note that the judge will take account of your prenuptial agreement, but they will also investigate its integrity and the circumstances in which it was agreed. It may or may not then be upheld. If it’s not upheld, the court will make its own financial relief order.
I don’t want to sign a prenuptial agreement. What can I do?
In a word – don’t! You can’t legally be forced to sign one. Whether you are the wealthier partner being pressured to commit a portion of your assets, or you’re the less well-off partner being encouraged to disclaim your right to financial support – you may feel pressure from your soon-to-be spouse, and even your parents or in-laws, threatening to cancel the wedding if you don’t sign. But if you don’t agree with, or fully understand, everything in the agreement, don’t sign it.
While prenups are not yet legally binding, they may be by the time you come to divorce, or they could likely be upheld by a judge if they meet the qualifying criteria. That’s why, if you want to use one, it’s so important to take detailed legal advice.
Our family legal team members are highly experienced in drafting prenuptial agreement, making detailed provisions for how you want to divide assets such as finances, pensions, businesses and property. For a confidential consultation today, email us at [email protected] or call us now on 0114 358 9009.