A pre-nuptial agreement is a contract between a couple that regulates what will happen to a couple’s assets if they divorce. It is negotiated and signed by a couple before they get married. A couple can only have a pre-nuptial agreement if they both agree to sign one.
Couples usually decide to have a pre-nuptial agreement for one or both of the following reasons:
- To provide certainty if their marriage ends, which will avoid the potential for acrimonious and expensive court proceedings if they divorce.
- To ring fence assets that either or both of the couple own before they marry, essentially taking them out of the matrimonial pot that is divided if they divorce and protecting those assets.
Legal Certainty
Since the Supreme Court case of Radmacher v Granatino in 2010, the divorce courts in England and Wales consider a pre-nuptial agreement one of the factors that must be taken into account when deciding what a fair financial settlement is when a couple divorce, provided that it has been properly entered into and the couple’s intentions are clear.
A judge is likely to follow the terms of a pre-nuptial agreement or at least order a lesser financial settlement for one spouse, as a result of the pre-nuptial agreement, provided that both spouse’s needs are met by the terms of the agreement.
For a pre-nuptial agreement to have legal weight and therefore be considered a factor if a couple divorce, the following should be followed regarding its preparation:
- The agreement should be prepared and signed at least three months before the couple’s wedding date.
- Both of the couple should instruct their own solicitor, so that they each receive independent legal advice upon the agreement and are fully aware of the implications of the agreement if they divorce.
- Both should provide details of their assets, income and liabilities to the other. This information is usually attached to the agreement in schedule form.
Protection of Assets
Pre-nuptial agreements are not just for the very wealthy. Whilst a certain level of assets is needed to make them relevant on divorce, as the terms of the agreement do need to meet the needs of both spouses on divorce, these agreements are often used to ring fence specific assets. For example inheritances or businesses can be ringfenced, so that they do not form part of the matrimonial pot to be distributed between the couple if they divorce. Need itself is open to interpretation. How much someone needs to buy a house on divorce may be less generously interpreted as a result of a pre-nuptial agreement.
Pre-nuptial agreements are not just there to protect the wealthier spouse. For those that have been married before, pre-nuptial agreements are often used to protect the assets that both the couple bring into the marriage, so that they are each able to keep these if they divorce. This is particularly important to those who have children from previous relationships and want to protect their assets for their children’s benefit.
