It is the perfect romance, a couple meet, fall in love and decide to get married. But marriage entails not only a change of name, an exchange of rings and vows to be recited, but also significant financial implications for both involved.
For romantics the thought of a pre-nuptial agreement can often be seen as a hostile and untrusting step to take which is not in keeping with the excitement and anticipation of planning a wedding celebration. However, for the more pragmatic of couples, a pre-nuptial agreement is an essential consideration prior to their big day; they view it as an opportunity to clearly set out how their property and other assets would be divided between them in the event that their marriage comes to an end. They are not planning for failure, but rather they are taking out an insurance policy which they hope will never be needed.
In essence, a pre-nuptial agreement is a written agreement entered in to by a couple before their marriage which sets out the division of money and property between them in the event of divorce. Whilst pre-nuptial agreements are technically not legally binding under English law, in recent years there has been a real shift in the English court’s approach to such agreements and the current position is that the court must give appropriate weight to a pre-nuptial agreement as a relevant circumstance of a case. The turning point was the Supreme Court’s decision in the case of Radmacher -v- Granatino in 2010; here the Supreme Court said that they should give effect to a pre-nuptial agreement, where the parties freely enter into it with a full appreciation of its implications, unless it would be unfair to hold the parties to the agreement.
For a pre-nuptial agreement to have weight at the time of a divorce, it must meet the following requirements:
- It must be entered into freely
- It must be entered in good time before the marriage, with the Law Commission recommending a timeframe of 28 days before the ceremony
- The parties will need to ensure that they provide full disclosure of their financial information to the other
- The parties will need to have taken independent specialist legal advice
- It must not prejudice the reasonable requirements of any children
- It must not leave one party with less than they ‘need’ whilst the other party is comfortably provided for
Like the wedding ceremony itself, a pre-nuptial agreement is a piece of paper that can provide an enormous amount of reassurance, transparency and certainty for both parties in a relationship. Contrary to popular belief they are not just for those of celebrity status or for the super-rich of today’s society and in fact, pre-nuptial agreements are increasing in general popularity for couples of all backgrounds as many now see the value in the protection they can provide. They are particularly useful for couples in second marriages or blended families wanting to ring-fence pre-acquired wealth, and for those who want to protect businesses, family gifts or even inheritances that have yet to be received.
Whilst parties to a pre-nuptial agreement should expect to be held to its terms once they sign it, if circumstances dictate, the English court does retain wide discretion to depart from an agreement either in full or in part in order to meet both parties’ needs. It is therefore essential that couples keep the terms of any existing pre-nuptial agreement under review and if necessary, consider a post-nuptial agreement to deal with any unexpected change in circumstance which could impact on the agreement being upheld.