When to use a Prenuptial Agreement
What is a pre-nuptial Agreement?
If you are planning to marry or enter into a civil partnership you might wish to consider entering into a pre-nuptial agreement. This is a document which sets out what you and your future spouse or civil partner would want to happen to your assets in the event of a separation in the future.
Who should enter into a pre-nup?
Anyone who is planning to enter into a marriage or civil partnership can enter into a pre-nuptial agreement, although they are most widely used in cases where one or both parties has pre-acquired assets which they would wish to protect in the future. This may particularly be the case if either party has a child or children from a previous marriage or relationship for whom they would wish to protect any pre-acquired wealth.
What sort of things should be included?
A pre-nuptial agreement can deal with all sorts of financial issues that might arise upon divorce and we will discuss your particular circumstances with you before any agreement is prepared. However as a general guide you might wish to consider the following key points:
- What will happen to pre-accrued assets and those accrued during the marriage itself?
- What will happen to the family home? Who will live there and how will any proceeds be divided if the marriage should fail?
- What will happen in the event of significant changes of circumstances during the course of the marriage, for example, the birth of children? The pre-nuptial agreement will normally provide for the agreement to be reviewed periodically and upon the occurrence of such significant events.
- How will any children and/or step children be provided for
Are pre-nups legally binding?
Historically pre-nuptial agreements have not been legally binding in England and Wales. However, whilst this is still generally the position, there was a significant case in 2010 in which it was decided that the court should give effect to a pre-nuptial agreement provided that it had been freely entered into by each party and that they each had a full appreciation of its implications, unless in all of the circumstances of the particular case it would not be fair to hold the parties to their agreement.
Then, in 2012, the Law Commission gave consideration to the issue of pre-nuptial agreements and recommended that legislation be enacted to introduce what would be called ‘qualifying nuptial agreements’. To be a ‘Qualifying Nuptial Agreement’ the contract entered into by the parties would need to meet certain criteria, as set out below:
- The agreement must be freely entered into by each party;
- The agreement must contain a statement signed by both parties stating that they understand that this is a qualifying nuptial agreement and that it will remove the court’s power to make financial provision upon a divorce, unless the agreement leaves either party without provision to meet their needs.
- The agreement should be entered into no less than 28 days before the wedding or civil partnership to ensure that each party has had time to consider the effect of the same and has not felt under pressure to enter into the agreement.
- Both parties must have received full disclosure of the other’s financial situation before entering into the agreement.
- Both parties must have received legal advice at the time that the agreement was formed.
Whilst no legislation making qualifying nuptial agreements legally binding has been introduced as yet, it does seems clear from the Law Commission’s recommendations that there is a move towards a situation where pre-nuptial agreements, provided that all the necessary criteria have been met, can be persuasive in determining how a couples assets will be dealt with upon divorce.