Prenups – all you need to know
By Samantha Hillas, a barrister at Atlantic Chambers in Liverpool, specialising in family law.
Just today I advised a client who faces the risk, after a very short marriage, of paying a large lump sum to the husband from assets which were entirely owned by her prior to the marriage. When asked why she didn’t consider a prenuptial agreement, her response was; “I was advised they weren’t worth the paper they were written on”. Once upon a time, that may have been true.
The background on prenuptials
Many believed that prenuptial agreements opposed public policy, by undermining the sanctity of marriage itself and being able to disregard the jurisdiction of the court.
However, a series of cases have slowly increased the importance of prenuptial agreements.
Prenuptial agreements cannot prevent any party making an application to court in the event of a divorce. The fundamental difference is the relevance of prenuptial agreements on the concluding outcome which may be decided by the court.
Matrimonial Causes Act 1973 (“the MCA”)
Any divorcing spouse will have access to the court as a source of help under the MCA. This is the statutory provision which allows the court, for example, to order that one spouse pays maintenance to the other, or to adjust property rights to meet both parties’ needs. When considering what orders to make, the court has to refer to a list of criteria which includes the parties’ ages, the length of the marriage, each party’s financial resources and the needs of the parties. The court can consider the existence of prenuptial agreements either as one of the circumstances of the case or under the head of ‘conduct’.
Until a prenuptial agreement is made legally binding and therefore capable of expelling the jurisdiction of the courts to determine the outcome of financial proceedings in accordance with the MCA, the existence of a prenuptial agreement will not prevent the court considering any case which comes before it.
In 1997, the court considered that “…there will come a case… where the circumstances surrounding the prenuptial agreement and the provisions therein contained might, when viewed in the context of other circumstances of the case, prove influential or even crucial”.
In 2003, the terms of a prenuptial agreement were considered to be of high importance in influencing the outcome of the court’s deliberations.
Today, there are a number of cases in which prenuptial agreements (especially if varied after the marriage) have assumed fundamental importance and the terms have been upheld by the court entirely.
The current position
As stated at the outset of this article, at the current time no self-respecting lawyer would ever advise that a prenuptial agreement was not worth the paper it was written on. It is clear that the courts have and will continue to have regard to the terms of any agreement which a married couple have agreed between themselves.
To many married couples, that is seen as no bad thing. As adults, the law allows us to regulate other aspects of our legal lives. We may enter into contracts to buy property, buy goods, employ others and be employed ourselves. If a party seeks to go back on the terms of those contracts, the law will step in to ensure the terms are upheld. There are many who consider that, as adults, we should be able to set a contract with our future spouses to regulate what would happen in financial terms in the event of a divorce. Rather than undermining the sanctity of marriage allowing couples to enter into marriage with the certainty of knowing what will happen to them in the event of a divorce will actually encourage and support marriage as the financial uncertainty, future costs and distress of contested financial proceedings will be avoided.
To this end, in 1998 the government published a consultation document “Supporting Families” which made various recommendations to enable couples to set a contract between them fairly. However, those recommendations have not been put into practice and there is no current proposal by the government to make a law in respect of this area. However after some years of inaction the government has recently commissioned a full-scale Law Commission review of marital property agreements which is due to report in 2012.
Tips on prenuptial agreements
Until any Law Commission proposals are legalised, the Supporting Families recommendations are commended to all those who wish to enter into a prenuptial agreement to protect themselves in the event of a divorce. While the recommendations below (which include the Law Commission’s recommendations and some of my own) cannot be any substitute for the independent legal advice which should be sought if you are contemplating a prenuptial agreement, the following may be considered as a useful checklist for those interested in entering into such an agreement:
• Both parties to the proposed agreement should take legal advice from a specialist in matrimonial law
• Both parties should make ‘full and frank’ disclosure as to their financial circumstances
• Neither party should place improper pressure upon the other to enter into such an agreement
• Adequate provisions must be made for any children who may be born within the marriage and/or provisions made for periodical reviews to ensure the agreement remains an adequate and fair reflection of the original agreement in light of changing circumstances
• Ensure that the negotiations are concluded and the agreement drafted and signed in good time before the actual marriage
• It may be sensible to attach to any agreement a certificate signed by each solicitor to confirm each party received independent legal advice and understood the consequences of entering into agreement
Disclaimer: the views set out above are solely those of the author. The outcome in each case will depend on individual and distinct facts. The author advises that the contents of this article are no substitute for proper and independent legal advice.