Pre- nuptial agreements, just an American thing?

The family team recently assisted a client with a pre-nuptial agreement, commonly referred to as a ‘pre-nup’. Our client did not initially realize that they could obtain one in England and Wales, informing us she had thought this was just an ‘American thing’. Another common misconception is that such agreements are reserved to those of celebrity status, but this is not the case.

Many people may think the idea of obtaining an ‘agreement’ before or after marriage is unromantic or raises trust concerns, however, pre-nuptial and post-nuptial agreements are a way of sharing a common intention of practicality and fairness in terms of those assets which are being brought into the marriage by one party, should the marriage end. 

What is a pre-nuptial or post-nuptial agreement?

When parties marry or enter into a Civil Partnership certain assets automatically become matrimonial, such as the family home, as well as pensions from the date of the marriage. This means both parties will have a claim on those assets when determining the finances upon divorce.

Pre and post-nuptial agreements gives the parties the opportunity to try and protect certain assets on divorce.

A pre-nuptial agreement is entered into by two parties before they marry or enter a civil partnership, it sets out what assets are owned by each party and what they would like to happen to those assets should the marriage or civil partnership breakdown and result in divorce.

Sometimes parties are unable to agree matters prior to the marriage or acquire assets thereafter and agree to enter into a post-nuptial agreement which has the same effect as a pre-nup. 

What can you include in a pre-nuptial and post-nuptial agreement?

There may be several reasons in which you may want to enter a pre-nup, including an inheritance, business or one party bringing more wealth or assets into the marriage than the other.

The agreement could include a property provision which could cover any property each spouse brings with them into the marriage and what would happen to the family home upon divorce, or any expected inheritances or gifts to one party. 

Is it legally binding?

An important consideration is to note that a pre and post-nups are not legally binding in England and Wales , but in the event of a disagreement it provides the court with evidence of what both parties had agreed would happen with their assets upon divorce.

The Court will consider many factors including section 25 of the Matrimonial Causes Act 1973 (Matrimonial Causes Act 1973(legislation.gov.uk)) when considering whether the agreement should be upheld, including if the parties entered the agreement with full understanding of the effects, of their own volition and whether the agreement is fair and can meet the parties needs, as well as those of any minor children who are to be cared for.

It is important to note the Court has discretion to depart from such an agreement, to ensure both parties needs are met. 

What factors will point to the fairness of the agreement?

It is vital that both parties share a common understanding of the financial assets and liabilities involved; this means both parties would undertake the process of exchanging financial disclosure. A schedule of assets and liabilities would also be annexed to the agreement.

Both parties have taken independent legal advice, this means impartial legal advice from two separate solicitors; this commonly involves one solicitor drafting the agreement and another reviewing the agreement.

Neither party being placed under any pressure or duress in entering into the agreement; this would mean that the agreement is entered into in good time before the marriage and that each party is able to consider the effects of the agreement.

Possible review clauses in the agreement, to ensure the agreement is updated after significant events, for example the birth of any children, the acquiring of any further assets or a change in financial circumstances.

Most importantly that the agreement makes reasonable provision to ensure the parties can meet their reasonable needs upon divorce.