Pre Nuptial Agreements: A Good or Bad Idea?

Philip Porter, Managing Partner at Fiona Bruce Solicitors, explains the pros and cons of a pre-nuptial agreement.

Having specialised in Family Law for over twenty years, twelve of those being here at Fiona Bruce Solicitors, it is over the last three or so years that I have noticed more couples willing to consider the use of Pre Nuptial Agreements before marrying. 

When considering the role of a Pre Nuptial Agreement and a financial claim on divorce, the starting point is Section 25 of the Matrimonial Causes Act 1973.  This requires a Judge to consider all the relevant circumstances of the particular case when deciding how to divide the divorcing couple’s finances.

It is important to note that no agreement can override a Judge’s power to divide the assets as he/she sees fit, based upon the Section 25 criteria.  This means, Pre Nuptial Agreement cannot stop a spouse applying to the Court for financial provision from the other.  However, a Pre Nuptial Agreement is a “relevant circumstance” and must be weighed by a Judge. 

In many cases, it will have a substantial impact on a Judge’s decision.  In fact, the leading case of Radmacher–v-Granatino, resulted in the Supreme Court saying that a Judge should give effect to a Nuptial Agreement that is freely entered into by each party with the full appreciation of its implications unless, in the circumstances prevailing, it would not be fair to hold the parties to their Agreement. That 2010 decision is only just really filtering into our legal system. 

 
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Disadvantages

So what are the disadvantages of Pre Nuptial Agreements that everybody should consider. 

Not legally binding – I said at the beginning, a Pre Nuptial Agreement will not necessarily be binding but, more often than not, a Court will uphold such an Agreement if freely entered into by each party with a full appreciation of its implications unless, in the circumstances, it would not be fair to do so.

Difficulties making financial provision for children  - a Court considering financial claims in divorce will primarily be concerned with ensuring any children of the family are financially secure.   The Court is likely to be sceptical that arrangements drawn up years previously will be in the children’s best interests if that Agreement fails to anticipate provision for future children being born.

Change in circumstances – a Pre Nuptial Agreement cannot predict what will happen during the marriage, and significant changes in circumstances may occur.  Should those changes occur, a Pre Nuptial Agreement that does not cover them will lose its relevance and is unlikely to be upheld by the Court.

Review – to increase the likelihood of a Court upholding the terms of a Pre Nuptial Agreement on the breakdown of marriage, there should be regular reviews.  Reviews will result in further time and legal fees being incurred, as well as potential difficulties agreeing any changes.

Unromantic – you or your future spouse may find the concept of a Pre Nuptial Agreement setting out what will happen to your finances should your relationship fail, rather unromantic at a time when you are in love and planning a wedding.

Bad timing – preparing for a marriage is stressful, and adding the pressure of discussing future finances and possible breakdown can put strain on a relationship.

Vulnerability of the economically weaker party – sometimes the economically weaker party wants to agree clauses limiting his or her rights, simply to get the agreement finished so they can concentrate on the wedding.  To ensure the agreement is fair to both parties and has the best possible chance of being upheld by the Court, you must both be aware of the implications of each clause and whether it is of benefit to you.

Can cause family upset  - a request for a Pre Nuptial Agreement may upset wider family members, such as parents who may feel affronted, and perceive the agreement a reflection of a lesser status or an implication that their son or daughter will be taken advantage of.

Inheritance issues – if a party waives inheritance rights in the Pre Nuptial Agreement, and his or her spouse dies while they are still married, he or she may be in a precarious financial position. 

Legal fees – a Pre Nuptial Agreement can save a significant amount of money if there are later divorce and financial proceedings, but if the marriage survives then the legal fees spent in drafting and negotiating the terms will effectively have been wasted.

Advantages

So, what are the advantages of having such an Agreement?

Clarity – you and your partner can make it clear to one another that certain property belongs to you alone and will not be shared during the marriage or on any future divorce. Divorce Case Law provides no real clarity on what this “non matrimonial property” is, but a Pre Nuptial Agreement can specify that property, taking away uncertainty. 

Certainty – you and your partner can agree at the outset of your marriage how your finances will be divided if you later separate or divorce.  This should save you both the uncertainty, time, stress and cost of expensive litigation if you do later separate or divorce.

Transparency – you and your partner should provide financial disclosure of your assets and income when preparing the Pre Nuptial Agreement, so you will both know at the outset of the marriage the value of each others assets.

It may save you money – while you and your partner will incur legal fees for us preparing and advising on the terms of the Pre Nuptial Agreement, it is usually much less expensive to negotiate and draft this agreement than to litigate about the division of your finances should you later separate or divorce.

Protection of assets – you and your partner can protect assets you may wish to ‘ring fence’ from one another, such as inherited assets, family heirlooms and family businesses.  If the Pre Nuptial Agreement ‘ring fences’ such property, the Court is less likely to award a share of that property to the other party on any future divorce.

Debt protection – if one of the parties has significant debts, either now or in the future, the Pre Nuptial Agreement can be used to protect the other party’s assets from being used to satisfy those debts.

Compensation for loss of career – you and your partner can agree that if, during the marriage, you or your partner give up a potentially lucrative career to care for the family, then that person should be entitled to a greater share of the assets on the break down of the marriage to reflect their loss of earning power, going forward.

Minimises acrimony on divorce – setting out how assets are to be divided on divorce in the Pre Nuptial Agreement should lead to fewer arguments about finances should you later divorce, and result in a more amicable relationship between you.

Improves communication – discussing financial issues can be one of the most difficult aspects of marriage.  Dealing with this at the outset can strengthen a relationship and support good communication during the marriage.

Marrying for money – if one of you is concerned that the other may simply want to marry you to acquire a share of your wealth, then agreeing a Pre Nuptial Agreement that provides protection for that wealth evidences their commitment, and hopefully takes away some of those concerns.

Would You Consider an Agreement?

Taking account of all of the above, at Fiona Bruce Solicitors, we do see a great deal of sense in couples considering these agreements, and would be happy to advise and assist further if it is something that you wish to explore.


Article Disclaimer

This article is for general information only and does not constitute specific advice.  You should not rely on the information in this article.  Fiona Bruce Solicitors recommends that you seek our specific advice if you wish to rely on the any part of this article.  Whilst Fiona Bruce Solicitors makes every effort to ensure that the article is accurate, Fiona Bruce Solicitors excludes all liability for claim, loss, demands or damages of any kind whatsoever (whether such claims, loss, demands or damages were foreseeable, known or otherwise) arising out of or in connection with the use of this article or any other information contained on this website.  Any information provided only applies to England and Wales.

Posted on June 30, 2015 and filed under Family.