However, in ordering various aspects of ‘wedmin’, many couples will not consider how their assets are to be divided if the unthinkable happens and their relationship were to break down. This is perfectly understandable given that, in the months before a wedding, many will consider it ‘un-romantic’ to discuss financial provision in the event of formal separation. However, as this article will suggest, pre-nuptial agreements offer couples the opportunity to enter into a formalised relationship with their ‘eyes-open’ and develop a bespoke document setting out their intentions in regard to both independent and jointly owned property. Far from being un-romantic, this is a pragmatic step that provides peace of mind and minimises argumentation in the event of relationship breakdown.
A pre-nuptial agreement is simply an agreement reached between potential spouses that provides for the distribution of assets and property if the formalised relationship (Marriage or Civil-Partnership) were to break down in the future. They are bespoke documents and, as such, pre-nuptial agreements can be drafted to reflect both the current and prospective property owned by either of the parties to the relationship. As a result, the drafting of pre-nuptial agreements is a flexible process that is driven by the individual requirements of the parties. Therefore, as opposed to perceptions in popular culture, the drafting process should be collaborative between two prospective spouses who are independently represented.
Unlike their legal status in other jurisdictions, pre-nuptial agreements are not strictly binding in England and Wales. Therefore, if a couple were to initiate divorce proceedings and make financial claims against each other, a court would not be bound to give effect to the terms of the agreement without recourse to any other considerations. Instead, as the Supreme Court stated in Radmacher v Granatino, a court should usually give effect to a pre-nuptial agreement which is freely entered into unless it would be unfair to hold the parties to the agreement in the circumstances of the case. Therefore, whilst a pre-nuptial agreement may not be binding on a court, it becomes highly persuasive on the way in which it will use its discretion under section 25 Matrimonial Causes Act. The usual result of this is a financial remedy order that largely reflects the terms of the agreement.
In terms of assessing how fair the pre-nuptial agreement is, a court will have to consider the wider circumstances of the relationship between the parties. This may include:
This aside, the courts have reiterated that, where the agreement has been entered into freely, there is nothing unfair in an agreement providing for the division of non-matrimonial property. Therefore, provided that the parties’ needs are satisfied, fairness does not require a court to depart from the terms of the agreement.
Usually, in order for a pre-nuptial agreement to carry weight, the following requirements must have been complied with during its negotiation:
In addition, usually, the agreement should be signed at least 28 days before the wedding is due to occur. Therefore, if you are setting a date for Summer, it is important that you seek out legal advice in relation to a pre-nuptial agreement as soon as possible.
Given their status in law, pre-nuptial agreements are an opportunity for couples to take ownership of asset division if their relationship were to break down in the future. Whilst they are not strictly binding, the existence of an agreement (that is capable of being converted into a consent order) potentially reduces the anxiety of drawn-out high-conflict financial proceedings in the future. Therefore, far from being an exercise in ‘preparing for failure’, couples should consider a pre-nuptial agreement as providing peace of mind and assurance that a court will have regard to their intentions when determining the division of assets on relationship breakdown.
The process of agreeing a pre-nuptial deed allows both you and your partner to enter into the relationship with your ‘eyes wide open’. Prior to any negotiations, both parties are required to make full financial disclosure of any assets they may possess. This includes assets such as:
With full disclosure, the financial landscape of the relationship will become apparent, and couples are able to confront any disparity openly and with the assistance of independent legal advisors. Far from being ‘un-romantic’, this provides an opportunity to pragmatically assess how the marriage will work financially and to designate property as existing outside the relationship. This is important for any property that may have been inherited/acquired before the marriage. The result of this is greater certainty and peace of mind when entering into a relationship, particularly if there is a disparity in the earning capacity between partners.
If a relationship breaks down and the formal divorce proceedings begin, either party may make a financial application against the other. In making such financial provision, a court will have regard to factors contained in section 25 of the Matrimonial Causes Act. These are essentially considerations for the court to apply according to the individual circumstances of the case and include:
In applying these factors, the court has a wide discretion in issuing a financial remedy order that meets the needs of both parties. If the couple have agreed a pre-nuptial deed, then the court will be heavily persuaded by the terms of that agreement. If they have not, then the court enjoys the discretion to give affect to an order that it considers fair in the circumstances and as meeting the parties’ needs. The importance of a pre-nuptial agreement, therefore, lies in giving expression to the intentions of the parties in a manner that can structure the court’s discretion in applying the section 25 MCA factors.
For more information on the standard divorce process, see a previous blog on the Peters May website accessible with the following link:
There is a common but widely held misconception that pre-nuptial agreements are exclusively for high-net worth individuals. Whilst many individuals with a high-net worth will enter into a pre-nuptial agreement in order to protect their own assets, such agreements are by no means the preserve of the rich and famous.
Given a pre-nuptial agreement is a bespoke document, they are relevant to any couple looking to formalise their relationship. This is regardless of the size/scope of any assets possessed. Interestingly, pre-nuptial agreements are occupying an increasingly important place in domestic law given that couples now tend to marry later and, as such, will readily develop independent assets aside from those generated by any relationship. For example, take the common scenario where a couple are set to marry with a modest asset pool. However, one partner previously received an inheritance which permitted the purchase of a small property from which they enjoy a rental income. That property was not purchased with the assistance of the other partner or as a result of any common endeavor.
Here, it is understandable that the partner should wish to ensure that the flat is ‘off the table’ if the relationship were to break down and financial proceedings were to be issued. Subject to party needs, this can be achieved with a fair pre-nuptial agreement even where any other assets held by the parties may be modest in size. Agreeing a pre-nuptial deed, in this scenario, would allow the parties to openly confront the nature of the property (as existing exterior to the relationship) and avoids later argument as to whether it should be assessed as part of the couple’s jointly held assets.
Other scenarios in which a pre-nuptial agreement may prove helpful include:
Overall, if you are ‘setting a date’ for this Summer, the last thing on your mind will be asset division in the event of relationship breakdown. However, as this article has explained, there are material benefits to sitting down and assessing joint and independently owned assets. Importantly, if you and your partner decide to obtain a pre-nuptial agreement, you should seek legal advice in order to maximise the chances of its enforcement if the worst were to occur and the relationship breaks down in the future.