What is a pre-nuptial agreement?

Often associated with high net worth clientele and Hollywood’s finest a pre-nuptial agreement (herein: prenups) is a contract entered into prior to marriage, which sets out the distribution of various assets upon divorce to provide greater security and control to the parties.

Historically, pre-nuptial agreements were seen as contrary to public policy on the basis that woman did not have the power to make decisions in a marriage or that it would encourage or pre-empt a separation. However, public policy swiftly changed as women were given greater equality in marriages. Indeed, a recent study by YouGov has suggested that ‘Generation Z’, those born after 1996, indicated a greater willingness to enter into prenuptial agreements to ensure the protection of their assets before marriage. Therefore, the misconception of prenups being limited to the ‘rich and famous’ is a thing of the past as affordable advice has resulted in greater access to legal advice for those who seek it. 

Distinction between pre and post nuptial agreements

A distinction must be made at this point between a pre-nuptial and post-nuptial agreements. As the words convey, a pre-nuptial agreement is one signed prior to the marriage and a post-nuptial, one signed after the ceremony. In terms of the legal effect of choosing one of the other, there is none but this article with deal with pre-nuptial agreements.

What content does a prenup cover?

The contents of a pre-nuptial document are tailored to the particular individuals. This can include, but is not limited to dealing with the separation of; inheritance, property, debt, children and savings. The contract sets out the distribution of the assets in the event of the marriage breaking down. This ensures that at the point of divorce those assets which have previously been distributed in the contract are not subject to the same pot of ‘matrimonial assets’ which are split during the financial consequences of divorce.

The value of a properly construed prenups cannot be underestimated especially for those entering into a marriage with assets which the individual wishes to protect. This has become more prevalent as people enter into marriage already owning a property on their own or having children. It provides for security should the inevitable happen especially for those with a significant disparity in wealth.

What legal effect have they?

Currently, pre-nuptial agreements are commonplace in the UK and the validity of such an agreement is based on a three-step test.

That the agreement is;

• One that is ‘fair and reasonable’ to both parties concerned.
• Both parties received independent legal advice before agreeing to the agreement, and
• Neither party was under duress to sign the document

Reviews of such agreements can be carried out when ‘significant’ changes occur such as the birth of a child or attaining a new property portfolio. The same three steps test must be met each time.

Although the validity of such agreements is not in question once the above criteria is satisfied, pre-nuptial agreements are still not automatically legally binding in the UK. Contrast this with the position in most of Europe, or the USA where they are, the question remains what effect do they have in the UK?

Although not automatically binding, the weight to be given to such agreements has been solidified in the leading case of Radmacher v Granatino [2010] UKSC 42. The appeal concerned the weight that should be given to prenups when considering s.25 of the Matrimonial Causes Act 1973. Section 25, deals with the factors courts must ‘have regard to in deciding how to exercise its powers’, in a financial settlement on a marriage breakdown. Such factors include; income, earning capacity, duration of the marriage, and standard of living enjoyed by the family before the breakdown of the marriage.

In this matter the husband was French and wife German, and a pre-nuptial agreement was made in Germany before their wedding. On divorce, the husband sought financial relief in the sum of £5.8m of the £100m fortune of his ex-wife which would be contrary to the pre-nuptial agreement which set out neither party would benefit from property owned by the other on termination of the marriage, in this case by the wife. On appeal to the Supreme Court, the court held that both the pre and post-nuptial agreements were to be seen as ‘a factor of magnetic importance’ (at para 46). As the agreement was found to have been entered into freely, the husband should not have been granted a benefit from the wife’s property, out with the relevant provisions for being the father of their children.

In the same theme, the court confirmed that, the validity of the agreement can be challenged. Indeed, the Supreme Court in Radmacher v Granatino, set out that to overturn a pre-nuptial agreement, the court must be satisfied that the individuals will was ‘overborne by her husband exercising undue pressure or influence over her’ (at para 48). This gives greater control for parties and reflects the reality that people’s situations and circumstances change.

Therefore, despite how you may feel about pre-nuptial agreements, they undoubtedly provide transparency and greater security for the individuals and is becoming an ever more popular practice.

If you require advice upon this issue, we have a highly regarded specialist family lawyer, Laurie Avadis who deals with Pre- Nuptial agreements.

Contact us on 02073872032 or use our online enquiry form.