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Pre and Post Nuptial Agreement Guide

Definitions

What is a pre nuptial agreement?

Pre nuptial agreements are made between two parties who intend to marry, setting out what will happen to their assets upon permanent separation.

What is a post nuptial agreement?

Post nuptial agreements are made between two parties dealing with provision for maintenance, children and division of property in the event of their marriage breaking down. The agreement can be entered into during the marriage or even after separation.

Assets that can be protected most successfully

Rooting any agreement in what a court would do on divorce, but trying to protect those assets that might ordinarily change classification from non-matrimonial assets, to matrimonial ones, provide the best protection.

Examples of non-matrimonial property:

  • Property - equity built up before the parties meet
  • Inheritance - accelerated or otherwise already received or to be received during the marriage
  • Trust interests
  • Tax efficient gifting from parents or other family members
  • Business assets and shareholdings
  • Individual savings and investments

As a marriage endures and the non-matrimonial assets become intertwined with the couple's affairs, this may change their classification to matrimonial assets, particularly if a property is treated as the matrimonial home.


Status in Law

As recently as 2003 the courts in the UK were regularly ruling that pre and post nuptial agreements were unconstitutional, invalid and against public policy.

The attitude of the judiciary towards these agreements has changedin the intervening years. Gradually, we have seen more and more evidence of the contents of well drawn and fair agreements being increasingly persuasive to the courts.

The Supreme Court handed down a ruling in 2010 in the case of Radmacher -v- Granatino which established a new test for nuptial agreements:

"The court should give effect to a nuptial agreement that is freely entered into by each party with a full appreciation of its implications unless in the circumstances prevailing it would be unfair to hold the parties to their agreement."

This creates a "rebuttable presumption" in favour of any nuptial agreement entered into after October 2010.  The court has a duty to reach a fair outcome although the following may be a considered in deciding whether the presumption is rebutted:-

  • A nuptial agreement cannot prejudice the requirements of any children of the family.
  • The court must respect the autonomy of individuals to enter these agreements.
  • Nuptial agreements with provisions about the classification of non-matrimonial property accumulated during the marriage may be particularly influential.
  • If circumstances change in a way not envisaged, this may render a nuptial agreement less likely to be upheld.
  • A nuptial agreement should not leave one party in real need, for example claiming state benefits.

So, are nuptial agreements now binding?

No. Pre and post nuptial agreements can only become legally binding if legislation is passed to that effect. The Supreme Court made it clear that a nuptial agreement cannot usurp the discretion of the court. The Matrimonial Causes Act 1973 remains the ultimate law. However, there is an equally clear message from the court that such agreements will now be upheld, if the prevailing circumstances are considered and agreements are properly drafted.

The Future

The Law Commission published a consultation paper on 11 January 2011 entitled Marital Property Agreements. The Law Commission have proposed the following safeguards:-

  • The agreement must be in writing and signed by the parties.
  • There should be full and frank financial disclosure.
  • The parties should be legally advised, as a minimum this should be to explain the effect of the agreement on the legal rights of that party and the advantages and disadvantages of the agreement.
  • There are no proposals as to the timing of the execution of such an agreement, but the agreement could cease to have effect after a certain period of time or on the happening of a specified event, such as the birth of a child.

To date, there is no draft legislation before Parliament. 

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