For those who have current or future wealth to protect or who are marrying for the second or third time perhaps, arranging a prenuptial agreement could be an essential part of the “wedmin” leading up to the big day.
In this short guide, we outline 10 questions we often get asked to help dispel some of the myths around nuptial agreements in England and Wales. This list also covers unusual circumstances, e.g. where a professional footballer or athlete has an unpredictable future long-term income, and how nuptial agreements can deal with that.
1. What is a prenup?
These agreements make provision for the split of a couple’s assets and income in the event of divorce. The alternative is allowing the divorce court to exercise its full discretion in determining how a couple’s wealth should be apportioned, both capital assets and income. Accredited members of the press can sit in on, and report about, family law cases, in the divorce courts. If one or both parties is in the public eye or of significant wealth, media interest will always be heightened. A prenup will help a couple keep their divorce and financial affairs private.
2. Are prenups worth the paper they are written on?
Yes. While prenuptial agreements are not formally legally binding, case law confirms that agreements which are entered into freely and with a full understanding of the implications should be upheld, unless it would be not be fair to hold the parties to their agreement. Provided certain safeguards and needs are met, parties to a prenup are therefore very likely to be held to the terms of the agreement.
3. What are the key benefits of having an agreement in place?
Nuptial agreements can provide some certainty and a reduction in legal wrangling at the time of any divorce (and therefore may keep a potentially contested divorce away from the eyes of the media). A person who has generated significant wealth before the marriage may well want to ring-fence that wealth. Someone with a high earning capacity may want to cap the maintenance provision to be made to the other party in the event of divorce.
If a couple is prepared to be realistic and fair, these agreements are effectively a planning tool which helps to ensure a more predictable resolution of the financial terms of a divorce. This can be particularly important for individuals who have a high earning capacity for a short period in their careers; for example professional athletes and footballers. They may want to protect and ring fence the assets they have built up during the peak of their career (often before marriage) to provide them with financial security once their sporting/playing career has come to an end.
4. What are the cons and pitfalls?
Nuptial agreements are sometimes difficult to broach (they are not exactly romantic documents) and can take time to negotiate. The couple will each need to give full financial disclosure to the other, so accountants, financial advisors and agents and/or managers can be involved. These agreements require full and frank discussions and can flush out uncomfortable differences in a couple’s expectations and values.
If a person is high profile, it may be that their income is derived from a number of sources. A footballer, for example, will receive ‘player wages’, income from endorsements and/or income from an image rights company. A prenup can help to protect these sources of income and provide certainty as to what, if any, part of their income will be shared and, if so, how.
5. What would the agreement contain?
The agreements are tailored to individual circumstances; no one agreement is the same as another. The agreement can deal with the division of both assets and income, or some agreements deal only with asset division and leave income to be dealt with at the time of divorce.
Prenuptial agreements would not be able to stipulate the provision to be made for any children of the marriage.
The agreement may set out how assets are to be held and managed during the marriage, for example, whether a joint account will be opened and how property is to be held.
We would consider whether a ‘review’ clause should feature in the prenup. Footballers, for example, often experience a significant (but usually expected) decline in their ‘on-field’ income towards the end of their playing career. There may also be uncertain periods of time when he or she is ‘out of contract’, therefore, not receiving ‘player wages’.
6. Do lawyers need to be involved?
Yes. The Law Commission has made proposals to give greater legal recognition to prenuptial agreements and the recommendation made by the Law Commission is that both parties must take independent (i.e. separate) legal advice on the terms of the agreement.
The involvement of lawyers in the negotiations will depend on the individuals; some prefer to leave this to the lawyers and others will negotiate directly with their fiancé(e). The lawyers will draw up the agreement and advise on the proposed terms.
This will be a major consideration for clients who want to ensure that the terms of the agreement, any subsequent divorce and their financial disclosure is kept confidential to the lawyers and their fiancé(e). Solicitors at Kingsley Napley have expertise in press and reputation management and will consider this aspect carefully when negotiating and drafting the agreement.
A detailed confidentiality clause is often included in the agreement itself but other steps can be taken to ensure the agreement and the financial disclosure is kept confidential.
8. How long do agreements take to negotiate?
This can depend, but a couple should allow as much time as possible. The Law Commission’s recommendations are that agreements should be entered into at least 28 days before the wedding to avoid any situations where it may be signed ‘under duress’, so it is important to start the discussions well in advance of the wedding to ensure sufficient time for the agreement to be negotiated, considered and signed.
9. What is the cost of an agreement?
Costs can range from £4,000 upwards, depending on the complexity of the financial arrangements and the length of the negotiations. However, the existence of a fair and negotiated agreement can mean legal costs are significantly lower in the long run if there are subsequent divorce proceedings.
It may be important for one party to contribute to the legal costs that their partner has or will incur if it will help to ensure that specialist legal advice has been obtained.
10. If the couple move abroad, will the agreement be valid?
Not necessarily. An English prenuptial agreement will not necessarily be upheld by a foreign court if the couple move abroad. It is not currently possible to have one global prenuptial agreement, entered into in one country, recognised worldwide.
If a couple or individual moves abroad after their marriage, it is essential that they take legal advice in the country they are moving to. Likewise, if it is a real possibility at the time of the marriage that the couple will be moving abroad, we have contacts with international family lawyers all over the globe and we would work together with them to ensure the client is as well protected as possible.
Equally, international married couples who move to the UK and previously signed a foreign marriage contract should take advice as to the likely validity this contract may have in the event of a marriage breakdown and divorce proceedings taking in the UK. They may need to take out an additional postnuptial agreement in the UK to safeguard their assets.
You may also be interested in reading our previous blogs on prenuptial/postnuptial agreements.