FAQ - finding your way through the pre-nup maze
Family
Comment | 20 October 2010
The landmark ruling by the Supreme Court in the case of Radmacher v. Granatino has given significant strength to importance of pre-nuptial agreements and greatly supports the rights that couples have, ahead of marriage, to divide their assets in the event that the marriage breaks down and the parties to it divorce. But is this where it ends?
Here our family team makes sense of the Supreme Court ruling and answer the most common questions surrounding pre-nups:
What is a pre-nup?
A pre-nuptial agreement or ante-nuptial agreement (a “pre-nup”) is an agreement between two people who intend to marry about what financial arrangements will apply in the event that they divorce. The agreement may deal with how the couple’s assets and possessions will be divided, what should happen to the matrimonial home and what level of maintenance, if any, will be paid.
Are pre-nups legally binding?
Almost. The Supreme Court has confirmed that pre-nups are not legally binding in the same way as other contracts. A pre-nup cannot override the court’s power to make a financial award following a divorce. But the Supreme Court has held that courts should give effect to pre-nups which have been freely entered into with a full appreciation of their implications and provided it isn’t obviously unfair to one of the parties.
In what circumstances will a pre-nup not be upheld?
Each case will depend on its facts but one example would be if the pre-nup left one party to the marriage in a state of financial hardship. Other factors which would be likely to lead to a pre-nup being judged unfair would be if one party to the agreement was placed under pressure to agree the pre-nup and hence did not freely agree.
Why have a pre-nup if they are not completely legally binding?
A pre-nup allows a couple to decide what they think should happen financially in the event that they separate. That can help to avoid a dispute arising in the first place and if the terms are agreed and reasonable the court will approve them. But even where one party, following the breakdown of the marriage, seeks to depart from the terms of the pre-nup then the fact that a pre-nup has been agreed should at the very least narrow the scope of the dispute and the range of possible outcomes because it should be taken into account by the court. A pre-nup can also contain provisions protecting confidential information about the marriage to prevent private information being published following a divorce.
In comparison to the cost of prolonged litigation the expense of obtaining a pre-nup is negligible. Given a pre-nup’s potential for protecting assets and avoiding protracted litigation the question for many couples should be: why not have a pre-nup?
Why do I need a pre-nup?
There are many reasons for having a pre-nup. One common reason is to protect inherited assets or family heirlooms against a future claim by a spouse on divorce. Others wish to protect assets against a 50/50 split on a divorce. Where someone has been married before they may wish to protect assets that they plan to leave to their children against a future claim by a new spouse. For some the aim is to avoid litigation in the event of a divorce and the potential for unwelcome and intrusive press coverage. Where one party is significantly wealthier than the other a pre-nup can reassure them that their future husband or wife is marrying for love rather than money. Pre-nups are not just about restricting what a spouse can claim financially; they can also be used by the wealthier party to make generous financial provision for their spouse.
When should a pre-nup be done?
A pre-nup must be agreed before the marriage takes place. Anyone considering a pre-nup should get advice from a specialist family solicitor as early as possible. The key is to avoid a pre-nup being agreed on the eve of a wedding ceremony as this could lead to the agreement not being upheld by the court. Ideally a pre-nup should be agreed at least three weeks before the marriage takes place.
Once a pre-nup has been agreed it should be regularly reviewed during the marriage. It is advisable to enter into a post-nuptial agreement affirming the terms of the pre-nup once the marriage has taken place. If the family’s circumstances change significantly from what was envisaged prior to the marriage, then it may be necessary to revise the agreement to reflect the changed circumstances.
Can I get a pre-nup if I am already married?
No, a pre-nup must be agreed before marriage. But married couples can enter into a similar agreement – a post-nuptial agreement - to govern what they intend should happen to their finances should they divorce. It is advisable for anyone entering a pre-nup to follow this up with a post-nup once they have married which re-affirms or varies the provisions of the pre-nuptial agreement they signed prior to the marriage.
How do pre-nups affect children of the marriage?
Pre-nuptial agreements cannot prejudice the reasonable requirements of any children of the family. This means that any provisions in a pre-nup which limit or exclude the financial obligations the parties will have towards their children, shall be treated as invalid.
