Prenuptial Agreements
Introduction
The highly publicised financial settlement dispute between Sir Paul McCartney and Heather Mills was finally resolved today. Details of the Judge's decision were made public which resulted in a £16.5 million payment by the ex Beatle to his former wife.
Following what has been a very public and undoubtedly costly case, one could be forgiven for asking if there might have been a better way to settle this acrimonious divorce? For example, what if the McCartneys had set up a Pre-nuptial Agreement?
Family law expert Rachel Edwards, a partner with Ashfords solicitors in Exeter, explains what Pre-nuptial Agreements are, the potential benefits of having one, their current legal status, and the issues which you would need to consider before entering into one.
What is a Pre-Nuptial Agreement?
A Pre-nuptial Agreement is a written contract made before marriage which seeks to control or limit the prospective spouses' financial liabilities and responsibilities towards each other if they subsequently separate or divorce. It has to be in writing and signed by both parties.
Are they enforceable?
At present, Pre-nuptial Agreements are not enforceable in England. Whilst not enforceable, an Agreement may, however, be taken into consideration by a court as part of the evidence in any subsequent divorce proceedings and in particular, in any financial settlement proceedings.
What are the potential benefits of having a Pre-nuptial Agreement?
By their very nature, when making a Pre-nuptial Agreement the parties have to think about how their assets and finances should be divided if their marriage breaks down.
This means that if they do sadly separate or divorce subsequently, they have already given this some thought.
In some cases, the couple will simply be happy to agree that what they had previously decided and put in the Pre-nuptial Agreement should stand. This can save a lot of time and additional expense at what is already a stressful time as a court can then be asked to approve what the parties have already agreed.
Even if, when the marriage breaks down, one of the parties disputes what was previously agreed, a Pre-nuptial Agreement can still be beneficial. This is because in any divorce proceedings, the court must consider all of the circumstances of the case, which will include, amongst other things, the history of the relationship, events leading up to the marriage and the marriage itself.
When considering financial settlements, the court will look for evidence of whether, during happier times, the parties discussed what should happen to their assets and finances if they subsequently separated or divorced.
A Pre-nuptial Agreement is exactly that. It is written evidence of what the parties previously agreed should happen if their marriage broke down. The court would therefore take the intentions expressed in the Agreement into account when deciding how to divide the assets and finances.
More importantly, in a recent case, the Court of Appeal said that if the Judge establishes that the parties had a Pre-nuptial Agreement he or she can require any party who is now seeking a different division of assets to explain and justify why the Agreement should not form the basis of how they are divided.
The division set out in the Agreement will therefore be the starting point and the burden will be on the party contesting it to persuade the Judge why the assets and finances should not be divided as they previously agreed they would if the marriage broke down.
Therefore, whilst Pre-nuptial Agreements are currently not enforceable, there are clear potential benefits of having one.
We would like a Pre-nuptial Agreement, so what should we do?
There are several important issues which a couple should think about and important steps which you should take before entering into a Pre-nuptial Agreement. If these are followed, a Judge is much more likely to take the intentions expressed in the resulting Agreement into account in any financial settlement proceedings.
1. Ideally, a Pre-nuptial Agreement should be negotiated and concluded well ahead
of the proposed date of marriage. If done, this is likely to avoid any suggestion at a
later date that the Agreement should not be taken into account because the parties did not take sufficient time to think about what they were putting in it and to reflect upon it. This will also allow everyone to concentrate on the most important subject, the wedding itself!
2. Each party must be open and honest about what assets they have and their financial position so that both parties have a true picture of the others finances before entering into any Agreement. If one party isn't honest, and later on in the marriage the other becomes aware that what they were told was not the true position, this could lead to a Judge deciding it would not be fair and reasonable to take the Agreement into account as it was entered into on the basis of incorrect information.
3. Both parties should obtain separate legal advice so that they understand the content of the Agreement and what it means will happen if it is enforced. The solicitors will also ensure that the meaning of the Agreement is clear so that there is no ambiguity in what is intended by the parties should happen if their marriage breaks down. This is vital because, if the document is not clear, a Judge can decide not to enforce the Agreement for this reason alone.
4. It is important that both parties willingly sign the Pre-nuptial Agreement. There must not be any pressure put on either party by the other to sign it. Pressure would be seen to include, for example, a threat by the more financially well-off party that if the other does not sign it the marriage will not go ahead.
5. Finally, it must be remembered that circumstances change during a marriage, such as the arrival of children for example. A Judge will consider any such changes in circumstances and may ultimately decide that, given these changes, it is not fair for the parties to be held to the agreement, which they made.
Our advice is always that it is better to have an Agreement than not to have one.The McCartneys may have saved themselves considerable distress and additional costs, if they had, at the least, put some agreed terms in writing at the sweet start of their relationship rather than having to deal with the issue at the bitter end.
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