Prenuptial agreements are increasingly becoming a common consideration by couples before marrying their significant other and especially in recent years, the notion of such an agreement is not only socially encouraged but considered to be a prudent financial decision.
What exactly is a prenuptial agreement?
A prenuptial agreement is an agreement that a couple enters before they marry, which sets out how they would want their finances to be divided between them if the marriage were to break down. The most common reason for people coming to talk to us to explore having a prenuptial agreement is that they want to protect a particular asset that they own before they marry. The sorts of assets clients seek to protect include property, a business, or, quite often, an inheritance.
Prenuptial agreements are not automatically legally binding in England and Wales, but they are likely to be upheld if the following steps are complied with, which are considered indicative of a well-formed agreement:
- Each person should obtain full independent legal advice
- Each person should understand and fully accept the implications of potentially compromising their marital claims
- The agreement should be signed at least (but preferably more than) 28 days before the marriage ceremony
- There should be no indication that either person is being forced to enter into the agreement
- There should be full and frank financial disclosure made by each person.
Crucially, the terms of the agreement should appear fair in all the circumstances of the case at the time of separation and be within the parameters of what a Court would order, applying the considerations given in the Matrimonial Causes Act 1973 Section 25 (“the Section 25 criteria”). In respect of the first bullet point above, a prenuptial agreement is capable of being contested, so it is particularly important that you take specialist legal advice in order to give your agreement the best possible chance of success. A prenuptial agreement can’t simply say one party gets everything. One of the most common reasons a prenuptial agreement is not upheld is due to the unfairness of the outcome of the implementation of the agreement on one party or that it does not satisfy the Section 25 criteria.
Statistics show that for some years marriage had been in decline and cohabiting relationships on the rise, however, there appears to have been an increase in marriages after the courts changed their approach to prenuptial agreements following the landmark case of Radmacher in 2010, and the 2014 Law Commission report on the marital property which set out recommendations around the formation of nuptial agreements. Historically, a main driver for not marrying had been the potential financial consequences for each party in the event of a divorce which could not be regulated or mitigated in advance of the marriage. This is despite the fact that in every other scenario an individual reserves the right to deal with, and dispose of their assets, and income as they wish. A prenuptial agreement goes some considerable way to allaying those fears.
If you are already married, you may choose to have a postnuptial agreement. This is an agreement entered into after marriage or a civil partnership that regulates the financial terms of any separation, divorce or dissolution. Postnuptial agreements are often entered into when, say, one of the couple unexpectedly comes into some inheritance or wishes to embark on a new business venture. Although postnuptial agreements are not automatically binding in England and Wales, if implemented correctly, they can be hard to challenge and offer significant security and reassurance within the marriage.
Common issues that are covered in postnuptial agreements are:
- What would happen to property that either of you independently brought into the marriage?
- What would happen to the family home?
- What would happen to any property given to you or inherited during the marriage?
- What would happen to joint assets?
- What would happen to your pensions?
- How would you deal with any debts?
- Would either of you pay or receive any maintenance from the other and, if so, for how long?
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