What is a pre-nuptial agreement?

Pre-nuptial agreements (also known as pre-marital agreements) seek to regulate in advance of your marriage what is to happen to your assets should the marriage subsequently break down. Previously such agreements have often been said to be unenforceable in England and Wales. The law in this area is slowly changing though and, although there remains no definitive answer to the question of whether such an agreement will be enforced by the Courts, they are becoming more common. In order to understand why there is such a lack of certainty it is necessary to look at the current law on the breakdown of marriage.

How does the Court deal with the finances on marriage breakdown?

On the breakdown of a marriage the Court has the power to make a variety of orders as to the assets and liabilities to include, property, savings, other capital assets, income and pensions. In considering which orders to make, the court will consider all the assets of the marriage, including those in the sole name of either party, whether acquired before or during the marriage.

In doing so the Court is obliged to take into account a number of factors which are set out in the Matrimonial Causes Act 1973 s.25. These are as follows:

  1. The income, earning capacity, property and other financial resources which each party has or is likely to have in the foreseeable future, including in the case of earning capacity any increase in that capacity which would be in the opinion of the Court reasonable to expect a person to take steps to acquire.
  2. The financial needs, obligations and responsibilities, which each party has or is likely to have in the foreseeable future.
  3. The standard of living enjoyed by the family before the breakdown of the marriage.
  4. The ages of each party and the duration of the marriage
  5. Any physical or mental disability of either party.
  6. The contributions which either party has made or is likely to make in the foreseeable future of the welfare of the family including any contribution by looking after the home or caring for the family.
  7. The conduct of each party if that conduct is such that it would be in the opinion of the Court inequitable to disregard it.
  8. The value to each spouse of any benefit which one spouse because of the divorce will lose the chance of acquiring (most usually pension provision).

In the context of all these factors the Court will make an order which it considers to be fair. This may involve transferring assets out of one party’s name and into the name of the other.

How does a Pre-Nuptial Agreement work?

As we have seen a pre-nuptial agreement seeks to agree in advance what should happen to the assets and, consequently, what type of orders should be made on the breakdown of the marriage.

The difficultly with this is that it is not possible to exclude the jurisdiction, the right, of the Court to make an order which it thinks fit and taking into account the factors referred to above. If the terms of the pre-nuptial agreement are at odds with what the Court would order then it may make a very different order from that which the parties had previously agreed.

It must also be borne in mind that the pre-nuptial agreement may often have been drawn up several years prior to any breakdown in the relationship and the circumstances may well have changed by the time divorce proceedings are commenced. An agreement which appeared fair and reasonable at the date it was made may not necessarily be fair at the date the marriage breaks down.

However, this is most certainly not to say that such agreements are of no benefit. Provided the agreement is reasonable, well drafted and complies with certain “safeguards”, it is most certainly a factor, possibly a very persuasive factor, to be taken into account by the Court in any subsequent divorce proceedings. Whilst the Court will still have to consider the statutory factors, it will do so against the background of knowing what the parties to the marriage intended would happen.

The “safeguards”

  1. Both parties need to take their own independent legal advice from a specialist matrimonial lawyer before signing such an agreement. Ideally that advice should be in writing.
  2. Both parties must provide full financial disclosure of their then current circumstances and so that the agreement is made in the knowledge of what each has. This requires both parties disclosing to the other details of the valuation of their assets, liabilities and income.
  3. The agreement must make reasonable consideration for any children, both those living at the time of the agreement and those which may be born during the course of the marriage.
  4. The agreement should be signed by both parties at least 3 weeks before the date of the marriage. This is so as to avoid any suggestion of undue influence or duress on one party to sign the agreement.

So who should consider making a pre nuptial agreement?

The short answer is anyone that thinks this is the right and sensible thing to do. There are some circumstances though where it may be considered a particularly sensible thing to do and, for example:

  1. Where you are older and may have acquired substantial assets before meeting your partner.
  2. Where one or both of you have a reasonable expectation of a substantial inheritance that you would not wish to be treated as an asset of the marriage.
  3. Where you have children from another relationship that you wish to make independent provision for. In this case you should also make a will and, if you already have one, consider whether it needs to be revised as a result of your intending marriage. Indeed, getting marriage is always a sensible opportunity to address this and you may find the section on our website about making a will to be of assistance to you.
  4. If, and putting this delicately, you have reason to be cautious of your partner; but in that case should you be getting married at all?
Please note that the information in this article is not designed to provide legal or other advice or create a solicitor - client relationship. No liability is accepted for any loss caused in reliance upon its content and you should not take or refrain from taking action based upon the same.