As a family lawyer I often hear clients and some other professionals like accountants say “But pre-nups aren’t worth the paper they’re written on, right?”… and they could not be more wrong.
This article is part of a series of articles that aim to debunk the top 10 myths and misconceptions around divorce and finances that we have come across with our clients.
Do Courts Recognise Pre-Nuptial Agreements?
A long time ago now pre-nups were considered void in the UK as a matter of public policy as they were considered to undermine the institution of marriage. Gradually as societal opinions shifted this changed and the courts became more open to recognising nuptial agreements to give greater autonomy to a couple who wish to regulate their marital finances and what they intend should happen if they divorce.
Nuptial Agreements – Pre-Nups And Post-Nups
There was also confusion historically about whether such a nuptial agreement entered into during rather than before a marriage (a post-nup) had a different legal status.
In 2010 the Supreme Court made absolutely clear what the position regarding nuptial agreements is in the UK, deciding:
- Pre and post-nups have the same weight, so it doesn’t matter if the agreement is entered into before or after a marriage takes place;
- The court should follow a properly entered into nuptial agreement unless at the time of the divorce it would not be fair (i.e. if it would not meet the needs of the financially weaker party); and
- It will be properly entered into where:
- The couple enter into it freely (with no pressure on them to sign up to it). We, therefore, allow at least 28 days to review the draft and ensure it is not signed less than 28 days before a wedding. Planning ahead is therefore key;
- The couple has a full understanding of the implications of signing in terms of how it changes their position. This is achieved by ensuring they each have independent legal advice; and
- There are no other factors that would undermine it as a contract such as fraud or misrepresentation. Full financial disclosure must be made and a summary of each party’s financial circumstances is attached to the agreement. It is important that this is accurate to avoid any suggestion later that the full picture was not explained when the agreement was signed.
If business assets are involved an initial valuation exercise may be needed.
These are complex documents that must address the couple’s situation and ensure provision for a financially weaker spouse would be fair in different circumstances in the future.
The important message is that when done properly, although they are not absolutely binding on a divorce court, nuptial agreements change the starting point from an equal division of the couple’s assets to the terms of the agreement.
They have been used effectively to:
- Ring fence assets (for example on a second marriage or where one spouse has received or expects to receive significant gifts/inheritance; or if a family business is succession planning to protect shares passed on to the next generation, whether before or during their marriage); and
- Regulate the extent to which assets brought into a marriage by one party would be shared with the other (e.g. limiting that to the growth in value of a business or fixing provision for a spouse at various stages of the marriage if they have very little themselves).
Specialist advice is key and we have a small team of experienced divorce lawyers who prepare and advise on pre and post-nups regularly.
To see the full series of our Top 10 divorce finance myths, please click here.