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What is a pre-nuptial agreement?
A pre-nuptial agreement (“pre-nup”) is a written contract made by two people before they are married. This contract details all assets and resources, for example properties, businesses and investments acquired by the parties, either jointly or separately, and sets out what each person’s rights will be over those assets in the event of the breakdown of the marriage. The agreement usually deals with assets and resources already acquired at the time of the marriage and also those likely to be acquired during the marriage.
Whilst we refer to “pre-nups” throughout this blog, the contents apply equally to pre-civil partnership agreements.
Who should make a pre-nuptial agreement?
Ideally, pre-nups should be considered by anyone who is planning to marry or remarry and has previously acquired wealth or significant inheritance prospects.
Having said that, it is still a misconception that pre-nups are only to be made by the wealthy. Perhaps a few decades ago, pre-nups were solely made by the rich, however now they have become just as essential for many people to protect their assets in the event of a divorce. This is partly because people are marrying later in life than in previous generations, allowing them time to accumulate their own assets.
Apart from using the pre-nup simply to protect your assets, such agreements can also be useful as a comprehensive document to set out how the parties will deal with their assets and income on divorce. Usually, divorce is a time of stress and heightened emotion and it can ease the pressure and stress knowing that the parties have set out what they thought was fair and reasonable at a time when they were not under such pressure and in such emotional distress.
Are pre-nuptial agreements legally binding in the UK?
No – they are not strictly ‘legally binding’ in the UK. At this present time, England and Wales does not allow for pre-nups to “oust the jurisdiction of the Court”.
The Court is required to consider Section 25 of the Matrimonial Causes Act 1973 (“MCA 1973”) when making an order as to financial division. The pre-nup is only one of many factors considered under Section 25 of the MCA 1973 that the Court will take into account when deciding on a fair financial outcome to a case. This means that if the parties’ circumstances have changed significantly since the pre-nup was made, the Court will have the power to ignore, or partially ignore, the terms of the pre-nup in order to reach a different division of the assets on divorce, if fairness and the needs of the parties, and any children, require it. The Court, however, is increasingly likely to uphold a pre-nup if all of the elements listed below are met. If, therefore, you enter into a pre-nup, you should assume that the Court will enforce the agreement as written.
There have been many discussions in political and legal circles about whether pre-nups should be legally binding. Judges have expressed fears that it would open the door to one party being left disadvantaged if a pre-nup were automatically upheld.
Pre-nuptial agreements appear to be growing in popularity, as there is now some clarity in the leading case of Radmacher v Granatino [2010] UKSC 42, which emphasises the increasing importance that the Court gives to pre-nups. This case lays down a two-stage test that, if satisfied, can provide a greater chance of the pre-nup being enforceable:
- The agreement must be fair and entered into fairly (see below); and
- It must not be unfair to hold the parties to their agreement in the circumstances prevailing at the time of the divorce.
Further assistance
For more information, please click on the Resources section of our website.
If you have any queries about pre-nups or wish to enter into one, please contact an experienced legal professional. Here at Teelan & Silwal we specialise in all aspects of family and matrimonial law, and a member of our team can advise you throughout the process of making a pre-nuptial agreement.
