What do I need to know about prenuptial agreements?

What do I need to know about prenuptial agreements?

A prenuptial agreement is an agreement that a couple might sign before getting married or entering into a civil partnership. Its main purpose is to set out the basis on which the couple will divide assets if and when the marriage or civil partnership ends. Usually the primary concern is with assets that one or both of the partners owns prior to the marriage. Wealthy people will sometimes use a prenuptial agreement to protect their assets from potentially opportunistic or “gold-digging” marital partners.

The traditional rule is that prenuptial agreements are not enforceable in England, Wales, or Northern Ireland, although in recent years the courts have, in some circumstances, been increasingly prepared to take them into account in divorce proceedings. In Scotland, the courts are more likely to enforce prenuptial agreements.

It is possible to have a prenuptial agreement for a civil partnership, and the legal principles relating to such an agreement will, in effect, be the same as those relating to a married couple’s agreement.

Should you have a prenuptial agreement?

Although you may want to take professional advice as to whether you should have a prenuptial agreement, there are some people for whom an agreement is especially appropriate.

If you are bringing significant assets of your own to the marriage (and in particular if there is a large difference between the value of your assets and those of your partner) then a prenuptial agreement may be appropriate. Likewise, if you have children from a previous marriage and want to ensure that you reserve certain assets for them if your new marriage fails, then a prenuptial agreement may be a way to try to achieve that.

Content of a prenuptial agreement

A couple will ordinarily tailor their prenuptial agreement to their particular circumstances, but typically the main focus of the agreement will be on the partners’ respective assets. Usually, there is an inventory of each partner’s assets, and one or more clauses detailing how the assets are to be dealt with if the marriage fails. Generally, there will, for each partner, be a list of assets that are to continue to belong to that partner only.

Sometimes a prenuptial agreement will also include details about post-divorce financial arrangements for children (which may be different for children of the new marriage and one partner’s children from a previous marriage). It is likely, however, that a court will give particular scrutiny to any matters relating to children, and would be unlikely to implement any provision of the agreement that could be harmful to the interests of a child.

Factors affecting the enforceability of a prenuptial agreement

Under the Matrimonial Causes Act 1973, the court has broad discretion as to how to order the division of property on divorce. In exercising that discretion, the court can – as and to the extent it thinks appropriate – take a prenuptial agreement into account as one of the factors affecting its decision about the division of property.

As a result, court decisions involving prenuptial agreements tend to depend heavily on the facts and circumstances of the particular case. There are, however, some basic principles that appear frequently in courts’ reasoning, and these tend to concern the fairness of the agreement.

In considering whether prenuptial agreements are fair, the court might look to factors such as whether the spouse who is seeking to have the prenuptial agreement set aside understood it properly when he or she signed it. In addition, did that spouse have the benefit of independent advice as to the content and effect of the agreement? Did he or she have sufficient time to evaluate it? Did the spouses negotiate the agreement before signing it, or was one spouse simply required to sign the other’s form of agreement on a “take it or leave it basis”?

In a recent, and well-publicised, case (Radmacher v. Granatino), which involved a German heiress and a French investment banker who married and lived in the UK, the court held that a prenuptial agreement was enforceable. The court based its ruling on three principles:

  1. A provision of a prenuptial agreement that seeks to remove the court from the divorce process will be void (but severable, so that the rest of the agreement is still potentially enforceable);
  2. A prenuptial agreement can be void if it does not comport with certain safeguards or is inconsistent with general contract law; and
  3. Any prenuptial agreement is subject to review by the court if there is a claim that it is manifestly unfair to one of the parties.

Thus it would seem that the court reserves the right to evaluate the substance of the agreement if one party claims that that the agreement is unfair.

Post-nuptial agreements

Sometimes a couple will sign an agreement during their marriage that specifies how their property is to be divided if and when they get divorced. In most cases, they will enter into such an agreement because they are thinking about getting divorced. In general, courts are much more likely to enforce this type of agreement than a prenuptial agreement.

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