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Pre Nuptial Agreements

Tuesday, 8 December 2009

A pre-nuptial agreement is a document entered into prior marriage, in which a couple set out their rights to any property, debts, income and other assets purchased together or acquired individually or that they have bought into their relationship in the event that the relationship ends. Pre- nuptial agreements can be drawn up by couples who are about to marry or enter into a civil partnership.

A succession of high-profile break-ups an increasing number of independently wealthy women, coupled with greater numbers of people marrying later in life with complicated family arrangements, has increased their popularity. The contents of a pre nuptial agreement can vary greatly and will largely depend on the position of the parties assets.

Legally, once married all these assets form part of the matrimonial pot, unless specifically protected. Recent months have seen the Law in this area subject to close scrutiny by the Courts.

The enforceability of prenuptial agreements in this country hit the headlines earlier this year when German heiress, Ms Radmacher's financial settlement was considered by the Court of Appeal. She and her husband had entered into a prenuptial agreement when they lived together in Germany, where Pre-Nuptial Agreements are binding. The couple later moved to the UK where they subsequently divorced.

The Matrimonial Causes Act 1973 is the legislation that provides guidance to a court that is faced with dividing a couple's assets on divorce. The Act states that all the circumstances of the case need to be taken into consideration, and provides a non-exhaustive list of factors that should be looked at. The Court of Appeal in Ms Radmacher's case determined that the prenuptial agreement that Ms Radmacher and her husband had entered into was such a factor to be considered, and importantly that it should be given decisive weight.

What does this mean for Pre Nuptial Agreements?

It remains the case that prenuptial agreements are not automatically enforceable upon a couple when they divorce. In Ms Radmacher's divorce it was important to the Court that she and her husband had both "willingly and knowingly" entered into the agreement. It was also influential that they had entered into it believing that it would be binding upon them under German law. Accordingly the decision has not been heralded as a guarantee that prenuptial agreements will be followed by the family courts.

It is fair to say that this decision is one of the most important endorsements of pre nuptial agreements in recent years, and one which is likely to represent a seismic shift in how such agreements are treated.

There is now the strongest indication possible that these agreements will be treated as binding, save in the most unusual of circumstances or where there are very compelling reasons to disregard them. There will be a presumption of such agreements being upheld, and it will now be the responsibility of the person trying to extricate themselves from the agreement to show that it should be disregarded. This is a huge shift from the approach to date, where it has been the responsibility of the person benefiting from the pre-nuptial agreement to fight hard to show why it must be followed.

Until Parliament formally legislates on this issue (the Law Commission is preparing a report which is not expected before 2012) pre-nuptial agreements will still retain an uncertain status.

The court will retain the power to ignore or vary them. Nonetheless, a very clear message is being sent out to those entering into such an agreement, it is more likely than ever that they will be held to its terms. Provided they adhere to the following Safeguards:-

  • Provision is made for children in the future;
  • Both parties have taken independent legal advice;
  • The agreement is not profoundly unjust;
  • Full financial disclosure has been made by both the parties to the agreement;;
  • The agreement has been drawn up at least 21 days prior to the marriage or civil partnership.

The Family Law Department at Rollingsons Solicitors are experienced in preparing pre-nuptial agreements. Please contact any member of the Department on 020 7611 4848 or email law@rollingsons.co.uk to discuss matter further.