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A pre-nuptial agreement (pre-nup) is a document entered into prior to marriage or civil partnership. It allows the parties to plan for how their finances should be dealt with in the event the relationship breaks down. A post-nuptial agreement is much the same, save that it is entered into after marriage or civil partnership has taken place, but whilst the parties are still living together. Pre-nups are more common, and perhaps preferred, but a post-nuptial agreement is nevertheless worthwhile. It is of equal weight if properly and fairly prepared, particularly if it is clearly entered into long before any relationship breakdown is suspected.*
The law concerning pre-nups is still developing. There have been no major developments since recommendations were made by the Law Commission in 2014, but it is still worth reminding ourselves about the importance of these agreements. Pre-nups are rightly becoming increasingly prominent. As unromantic as the prospect of a pre-nup is, it is a worthy consideration for all bride and grooms to be. A pre-nup should be viewed from a practical perspective, rather than feeling that it is an premonition that a relationship is doomed to fail. Think of it as a kind of one-off insurance policy. Most of us pay out for insurance on an annual basis for our cars, our homes - even our lives. We do not take out home insurance in the expectation that we will be burgled, nor life insurance feeling that we are predicting an early death. This is practical, everyday protection, and a pre-nup should be no different.
A pre-nuptial agreement does not hold all the answers, but if properly prepared at the outset it should provide reassurance over at least some of the issues which cause concern during a separation. Far better that areas of controversy are identified early on, whilst the parties are happy and able to consider things sensibly, than later, when bitterness and hurt cloud judgement. Moreover, a relationship breakdown can be overwhelming enough on its own, without difficult decisions about financial practicality being added to the burden. A pre-nup can provide certainty and a reduction in legal wrangling at the time of separation.
Unlike many other jurisdictions, England and Wales do not currently recognise pre-nups as legally binding. Nevertheless, providing it has been properly prepared and executed, it is likely that the Courts would find a pre-nup highly persuasive should one party need to rely upon it. In 2010, the landmark case of Radmacher v Granatino reinforced this principle, and it has yet to be successfully challenged in any subsequent cases. In 2014, the Law Commission laid down additional guidelines, prompted by the 2010 case, which support and clarify when agreements should be upheld. Subject to any future developments, parties can be reassured that agreements are likely to be upheld unless unfair.
In order to ensure that a pre-nup has the best possible chance of being upheld should the need arise, first and foremost it must be considered fair. The parties should have entered into it freely, and should have received the benefit of full disclosure of material information about the other party's financial situation. Both parties should have received independent legal advice from different solicitors. The more that future unknown situations have been addressed, the more likely that developments over time could render the agreement unfair. What is likely to be accepted is the ring-fencing of non-matrimonial property such as pre-acquired assets or future inheritance. That said, the needs of a financially weaker party still need to be met, in order to avoid unfairness. There is a careful balance to be struck between planning for what is likely to happen in the future, yet not taking a blanket approach of covering all possible scenarios.
Sadly, statistics indicate that the chances of a marriage ending in divorce are relatively high. A study by Relate showed that 87% of couples claimed to be in a good relationship, with around half stating that they rarely or never argued. Despite this, in 2016, 42% of marriages ended in divorce. It is only sensible therefore to put provisions in place, so that if you do fall within that 42%, divorce, or indeed any separation, can be made simpler and less acrimonious for all involved. The average age and length of time that people have been married before divorcing is increasing year on year. One can only speculate that amongst the reasons behind this are the financial implications, and cost of doing so. Perhaps if more people had a pre-nup in place, the prospect of separation would seem less daunting, and couples would not feel trapped in an unhappy relationship for so long. A pre-nup should provide a more predictable resolution for the finances in a relationship breakdown and should be an essential consideration for anyone planning to marry or enter a civil partnership.
For further information or to discuss setting up a pre-nup please contact a member of our Family Department, for contact details click here.
* Any references to pre-nuptial agreements throughout this article are also applicable to post-nuptial agreements. Any reference to marriage is also applicable to civil partnership.