What is a pre-nuptial agreement and do I need one?

A couple may consider preparing a pre-nuptial agreement ('pre-nup') in anticipation of their marriage. In the UK, approximately one in five couples who married since the year 2000 have a nuptial agreement.

In this article, family paralegal Lydia Hope explains what a pre-nuptial agreement is. Lydia outlines the pros and cons of a pre-nup and discusses who should consider making one.

Please contact us on 01707 329333 or email family@crane-staples.co.uk if you have any queries regarding pre-nuptial agreements.

 

What is a pre-nup?

A pre-nup is an agreement entered into by a couple before they are married. The agreement sets out what they would like to happen to their assets if the marriage were to break down. These assets may include current and future finances, property and belongings.

Couples entering a civil partnership have the option of entering into a pre-civil partnership agreement. In this article, we use the terms ‘pre-nup’ and ‘pre-civil partnership agreement’ interchangeably.

Do I need a pre-nuptial agreement?

There is a common misconception that a pre-nup is only necessary for couples with considerable wealth. Another misconception is that pre-nups are only for couples where one partner has significantly more assets than the other. While pre-nups are particularly useful for these couples, there are several reasons a couple might consider a pre-nup.

While the topic of divorce can be sensitive, statistics show that, presently, 42% of marriages end in divorce. A pre-nup provides clarity by enabling a couple to determine how their assets will be divided if the marriage ends. Furthermore, a pre-nup gives couples an opportunity to take control of financial plans and regulate financial affairs throughout the marriage.

Finances play a role in every marriage. Couples who have agreed the financial arrangements before marriage are less likely to experience tensions around finances in the future.

What is the purpose of a pre-nup?

The primary purpose of a pre-nup is to enable a couple to determine how their assets will be divided if their marriage breaks down. Often, a couple may consider a pre-nup for a particular reason. For example, to provide protection from debts, or compensation for loss of career.

What are the advantages of a pre-nuptial agreement?

There are many advantages to have a pre-nuptial agreement in place, including:

Protection of non-matrimonial assets

A pre-nup can protect the assets you have acquired before your marriage. It can also protect some assets that you acquire during your marriage. In doing so, these assets are effectively ‘ring-fenced’ as non-matrimonial property.

These assets can include:

• inheritance you expect to receive or have received
• gifts from third parties (such as heirlooms)
• and other property owned prior to your marriage.

Protection of business partners

A pre-nup can protect a business partner’s interest in the business (such as a family business). It can prevent an ex-spouse from being awarded an interest in the business upon divorce. This can ensure the business remains undisrupted by orders for its distribution as a matrimonial asset. It also prevents the court from encouraging an ex-spouse to participate in running the business.

Protection of the financial interests of children or family members

A pre-nup can protect the financial interests of children or other family members by ring-fencing assets. For example, you may wish to ring-fence assets for children from a previous relationship.

Protection against partner’s debts

A pre-nup can protect you from your spouse’s debts, either current or in the future. A pre-nup can prevent your property being used as collateral if your partner accrues significant debts.

Compensation for loss of career

A pre-nup can make provision for compensation for loss of career. For example, if you give up a potentially lucrative career to care for the family. A pre-nup can entitle you to a greater share of assets on the breakdown of the marriage. This would reflect your loss of earning power going forward. During divorce proceedings, it can be difficult to persuade the court to award compensation for a loss of career. However, provision for compensation in a pre-nup is more likely to be upheld.

Reduces contention during divorce

By having a pre-nup in place, there are likely to be fewer arguments about financial arrangements upon divorce. This facilitates a more amicable divorce and also saves time and money on legal fees.

Certainty

A pre-nup enables a couple to agree from the outset how their finances will be divided if they divorce. This provides certainty during an often stressful and emotional time.

Are pre-nups legally binding?

Presently, pre-nups are not legally binding in England and Wales. Parties to a marriage cannot oust the jurisdiction of the court by entering into a pre-nup. Rather, the court must give appropriate consideration and weight to a pre-nup.

Upon an application for financial relief, the court must consider the needs of the parties and children of the family. It follows that any departure from a pre-nup will most likely be on the basis of need. A pre-nup will not be upheld to the extent that it prejudices the needs of any relevant children.

This approach was confirmed in the Supreme Court’s landmark ruling in Radmacher v Granatino.This case also confirmed that the court will give effect to a pre-nup if a three stage ‘fairness test is satisfied:

1. The agreement must be freely entered into.
2. The parties must have a full appreciation of the implications of the agreement.
3. It must be fair to hold the parties to their agreement in the circumstances prevailing.

Following Radmacher v Granatino, the Law Commission made recommendations  for the implementation of ‘Qualifying Nuptial Agreements’. These recommendations propose legislative reform that would make Qualifying Nuptial Agreements legally binding.

Law Commission recommendations for qualifying nuptial agreements

The Law Commission recommended that a Qualifying Nuptial Agreement meets the following criteria:

1. The agreement must be contractually valid (and able to withstand challenge on the basis of undue influence or misrepresentation, for example).
2. The agreement must have been made by deed and must contain a statement signed by both parties that they understand that the agreement is a qualifying nuptial agreement that will partially remove the court’s discretion to make financial orders.
3. The agreement must not have been made within the 28 days immediately before the wedding or the celebration of civil partnership.
4. Both parties to the agreement must have received, at the time of the making of the agreement, disclosure of material information about the other party’s financial situation.
5. Both parties must have received legal advice at the time that the agreement was formed.

Following the publication of these recommendations in 2014, the Government advised that a formal response would be provided “in due course in the context of our wider plans for family law and system reform”.  A Private Member’s Bill introduced in 2016 sought to make pre-nuptial agreements legally enforceable. However, this Bill did not progress past its second reading in the House of Lords.

When should a court give effect to a pre-nuptial agreement?

Judgments post Radmacher v Granatino have indicated that the courts are minded to uphold the terms of a pre-nup insofar as is possible. This was affirmed in the recent case of MN v AN [2023], which is perhaps one of the biggest tests of the principles applied in Radmacher v Granatino to date.

In MN v AN, the wife argued that, as the agreement was pre Radmacher v Granatino, she should not be bound by its terms.. The wife argued that she had experienced undue pressure to sign the pre-nup, asthe marriage would not go ahead if the agreement was not signed. Finally, the wife argued that the agreement was unfair on the basis of needs.

The two-stage test

The Judge noted that the parties had entered into the pre-nup with the understanding it would be upheld. The Judge applied a two stage test:

1. Were there any circumstances to exclude or reduce the weight attached to the pre-nup?
   The Judge found that there were not.
2. Does the pre-nup provide a fair result in accordance with all the s25 MCA 1973 factors?
   The Judge found that it was.

In his decision, the Judge noted that there had been full disclosure between the parties. The Judge found that the parties had each received proper legal advice. The Judge also noted that the parties had the benefit of a cooling off period. While accepting that the wife experienced pressure, the Judge was clear that this was not sufficient. Rather, the wife must have experienced undue pressure to sign the prenup.

The decision in MN v AN is a stark reminder. You should not sign a pre-nup unless you intend to be bound by it.

Can a pre-nup include child arrangements?

Making provision for future children is fraught with difficulties as a pre-nup cannot predict future circumstances. When deciding upon child arrangements (childcare plans between parents), the court must consider the best interests of the child at that time. Accordingly, the court is unlikely to be persuaded that an agreement drawn up some years ago remains pertinent. It should also be noted that a pre-nup cannot oust the jurisdiction of the Child Maintenance Service. A parent can apply to the CMS for a maintenance calculation at any time. Ultimately, any clauses regarding child maintenance will be subject to review if a parent questions the adequacy of the arrangement.

How long is a pre-nup valid?

A pre-nup will last for the length of your marriage. However, as per Radmacher v Granatino, the agreement must be fair. It follows that, if the agreement no longer meets the needs of the parties and children of the family, there is the risk that it will not be upheld by the court. Therefore, it is often advisable that the agreement contains a review clause stipulating that the agreement be reviewed after a certain period of time or life event, to reflect the current position of the parties.

What happens if you say no to a pre-nup?

You should not experience undue pressure to enter into a pre-nup. Undue pressure to enter into a pre-nup can invalidate the agreement. If you are experiencing undue pressure you should speak to your Solicitor about this.

It is particularly important that you do not enter into a pre-nup if you feel you are being coerced by your partner or you are a victim of domestic abuse (this includes financial abuse). If you are experiencing domestic abuse, you should contact a support service such as the Hertfordshire Domestic Abuse Helpline for assistance.

What steps should I take to get a pre-nuptial agreement?

If you are considering a pre-nup, you should take steps to discuss this with your partner well in advance of your wedding.

A pre-nup should be executed not less than 28 days before the marriage takes place.

Both you and your partner should each obtain independent legal advice in respect of the pre-nup. You will be expected to exchange financial information before your Solicitors begin drafting and negotiating the terms of the pre-nup. Therefore, it is best to get this out of the way so that you can focus on planning your wedding.

Do I need a Solicitor for a pre-nup?

Yes, a specialist Family Law Solicitor is essential to ensure that both you and your partner understand the full implications of the agreement. The need for proper legal advice was again confirmed by the court in MN v AN. A Solicitor will help you to crystalize your intentions in the agreement. Proper legal advice will ensure the agreement is upheld in the event of divorce. Please contact our team on 01707 329333 or family@crane-staples.co.uk for help with your pre-nup.

Can I draft my own pre-nup?

A DIY pre-nup is never recommended. The DIY document may inadvertently expose you to legal pitfalls. The agreement may not accurately reflect your wishes and intentions. Furthermore, without both parties receiving independent legal advice, the court is highly unlikely to uphold the agreement in the event of divorce.

How much does a pre-nuptial agreement cost?

The cost of a pre-nup greatly depends on the extent of assets, complexity of the agreement, and the attitude of your partner. However, a correctly drafted pre-nup can do away with the cost of lengthy divorce proceedings. In this context, costs can be comparatively minimal.

Please get in touch with our Family team for further information about our fees.

Contact Us

Our Family lawyers are specialists in preparing and negotiating nuptial agreements. If you are looking for pre-nup solicitors in Welwyn Garden City, Hertfordshire and surrounding areas, we can help you.

We have significant experience in this work and have positive working relationships with other specialist Family Solicitors in the area. This means that we are well-placed to prepare your document as efficiently and constructively as possible.

Our Family team would be pleased to assist you. Please call us on 01707 329333 or email family@crane-staples.co.uk if you would like to discuss your nuptial agreement.

We look forward to hearing from you.