In England and Wales prenuptial agreements operate as a means of protecting the wealth of the economically stronger partner and avoiding or reducing the impact of the divorce court’s discretionary jurisdiction in relation to the financial aspects of a divorce which, in the absence of a prenup, often results in a couple sharing all the assets of a marriage.
They are particularly appropriate in situations:
- where one party has substantial pre-acquired wealth
- where one or both of the parties wish to ring fence inheritances they received prior to the marriage or expect to receive during the marriage
- where there are substantial trust assets, especially those derived from gifts or inheritances
- of second marriages between couples who want to preserve their pre-acquired wealth to benefit children by their former marriage(s)
In order for a prenuptial agreement to have the best chance of being upheld by the court on divorce you should follow accepted best practice to try and ensure that the agreement is fair. Fairness covers both the process of negotiating the agreement and the substance of the agreement and should include consideration of the following (which take account of the recommendations made by The Law Commission in their Final Report, published in February 2014: Matrimonial Property Needs and Agreements).
It is usual for the economically stronger partner to pay the legal fees of the economically weaker partner.
There needs to be a frank exchange of information about each party’s financial position. Each party’s financial disclosure is usually summarised in a schedule attached to the prenuptial agreement in which they summarise their respective financial positions – i.e. income, assets (including property, savings, business assets, trusts, pensions and any other financial resources they are likely to have in the foreseeable future) and liabilities. Listing the financial assets in the schedules makes clear the parties respective financial positions at the time of the marriage and reduces the risk later on of parties being accused of concealing assets.
It is essential that you allow enough time for the preparation of the prenuptial pgreement and attendant negotiations between the parties with the benefit of legal advice on both sides. It is important to take your time and not to rush things and to conclude matters so you sign up to the Agreement at least 28 days before the date of the wedding. In general terms you should consider instructing lawyers in relation to the proposed Prenuptial Agreement about 5 to 6 months in advance of the date of the wedding, perhaps longer if there are particularly complex assets, or you need to involve foreign lawyers because of the likelihood of you living abroad during the marriage or having assets abroad.
No Duress or Undue influence or Misrepresentation
You may be advised to have a Postnuptial Agreement as well as a Prenuptial Agreement which can be useful to allay you being accused of subjecting your fiancée to duress to enter into the Agreement.
The Agreement must be Fair: Reviewing the Agreement
Whether or not the provision in the agreement is fair will be assessed at the time of any breakdown of the marriage. Obviously it is extremely difficult at the beginning of a relationship to predict what is likely to happen and to ensure that the agreement remains fair with the passage of time and changes in circumstances. For this reason, reviews are often written into the agreement (e.g. periodic reviews say every 5/10 years, or on particular changes of circumstances such as involuntary loss of employment, illness or disability, the birth or adoption of children and similar developments). However, many clients do not welcome having to review the agreement because they find the prospect of such discussions awkward and embarrassing and are anxious not to have to go through them every few years.
It is clear that a Prenuptial Agreement will not be upheld by the court if it fails to meet the needs of children or of either parties, where there are sufficient resources to avoid this.
You may need to take advice from foreign lawyers where you plan to marry abroad in a country which has a matrimonial property regime, or in particular, where you plan to live abroad. It may be necessary to have a separate agreement for each of the countries where you may live, or at least to obtain expert advice as to the requirements of prenups in each of those countries.
If you are considering entering into a prenuptial agreement, we provide free initial legal advice by telephone or e-mail. We assess your requirements and provide initial advice about how a prenuptial agreement could work in your particular circumstances, at no cost to you and without any obligation for you to instruct us formally to act. If you do then decide to instruct us formally, we will invite you to attend a meeting. After that meeting, we will provide you with an estimate of what the cost of your prenuptial agreement is likely to be.