In this Webinar, Andrea Panayiotou discusses pre-nuptial agreements and post-nuptial agreements.
What is a pre-nuptial agreement?
A prenuptial agreement is a formal, written agreement between two partners prior to their marriage.
It sets out ownership of all their joint and individual assets, including the marital home, savings, pensions and debts. The agreement explains how all of this will be divided in the event of a breakdown of the marriage. Essentially it gives the couple some certainty, in case of a divorce, on how the finances will be deal with.
There is a concern among many that pre-nuptial agreement predisposes to a divorce, that it is tainting the marriage. It is, however, none of those things. In essence, pre-nups can be seen as a type of insurance. For example you wouldn’t buy car insurance on the assumption that you will be in an accident, and you wouldn’t buy house insurance on the assumption that it may burn down. Pre-nups should be viewed in the same light. Although you hope to never divorce and live happily ever after, having an insurance in place, on the off chance, you do, is simply making your life easier.
So why should you get a Pre-nup?
For one, a pe-nup provides peace of mind for both people involved, in any situation. However, there are specific situations that you’d definitely should have a pre-nup in place. For example
- You may want to protect inheritance or future inheritance.
- There may be assets that are difficult to easily split 50/50 such as pensions
- You might have children from a previous relationship and want to ensure that some of the marital assets are reserved for them and protect their inheritance rights.
- You may have a business that’s booming and want to retain control of it
- If you or your partner has debt, you could include a debt clause to prevent you from being liable at all.
You’ll see from these examples that there are many ways to personalise your prenuptial agreement. The prenup doesn’t always have to be a strict 50:50 split, it can be more weighted on one party or even the children.
Is the Pre-nup legally binding?
As lawyers – what we get asked the most is if it is legally binding, in other words is it set in stone and can anyone challenge it. Of course, when you watch American TV shows people assume the same laws to prenups apply here, which isn’t the case.
At the moment, Pre-nups aren’t legally binding, strictly speaking. However, since a landmark case in 2010, judges are attaching a lot of weight to pre-nups. A smartly drafted pre-nup is likely to be upheld in full, unless they are considered to be unfair. In any event, a pre-nup will have a considerable weight, if done correctly, during divorce proceeding.
What makes a prenup more likely to be upheld?
- The terms of the agreement must be fair and meet the needs of the parties and any dependent children. If this condition is not met, there is little prospect of the agreement being upheld:
- Contractual validity – it must be capable of being enforced as a contract;
- No evidence of undue influence or duress – the parties must enter into the agreement of their own free will;
- Execution – the agreement must be signed or executed as a deed;
- Timing – the agreement should beprepared and signed in good time before the wedding/civil partnership. The Law Commission report addressing Qualifying Nuptial Agreements recommends that a prenuptial agreement should be entered into at least 28 days prior to the wedding or civil partnership;
- Both parties shoulddisclose full details of their respective financial situations;
- Independent legal advice– to be taken by both parties at the time that the agreement was formed to ensure that they fully understand the consequences of the agreement.
When a client contacts us explaining that they want a divorce and there is a prenup in place, we will go through the points mentioned above regarding whether it is fair or not. If the client thinks the prenup was imposed upon them, we’d also look to see if there were any negotiations made at the time and see if this adds anything to the case.
Below are some scenarios passed on to us by our webinar participants, that Andrea answered during the webinar.
“I’ve gotten married and only decided now that I think we should’ve gotten a prenup. We’ve been married for 4 years and so I’m not sure if this is even something I can do anymore. I don’t think that we’ll ever get divorced however, lockdown is making me overthink and consider that I’ve inherited a lot of money from my late father and so I’m worried that if my husband and I ever do get divorced, he will get lots of it. I feel that this would be unfair on me.”
Now, there are some scenarios where people have gotten married and later either come into some money, such as this scenario, or thought it might be best to get a pre-nup for future ease.
We would advise to get what’s called a post-nuptial agreement. This effectively does the same thing as a prenup would but would be signed after the marriage. Again, both parties would need their own lawyers, would have to provide full financial disclosure and so on.
“I’m a second-year fashion design student and my boyfriend (who I’ve been with for 8 years) is a successful accountant. My boyfriend also comes from a wealthy family and has great career prospects. On Valentine’s day, my boyfriend proposed and naturally I was ecstatic. I’ve always thought that pre-nups are a good idea and want to explore my options. I told my friends about this and they assumed that it was him, who had brought it up, as he was the one with assets or prospective high-earning. But I corrected them, that it was my idea, because I am going to go into fashion, I eventually hope to have my own company and know I need to protect myself. I’m a little confused if I even can protect myself when I’m not earning much yet. Does the prenup only apply to rich couples? And should my now fiancé initiate the pre-nup?”
The pre-nup is not discriminating on how much each party is earning, if they’re even earning at all. As you are saying you wish to protect your potential business, the pre-nup will be drafted in a way to review and amend when this occurs. So, for example, if in 5 years’ time you create your business, you can draft in a new clause to your prenup to protect this, in the event of divorce.
You’ve asked if the pre-nup only applies to rich couples and again it doesn’t. The pre-nup can be less vague and mention that if you do come into property or any assets that it would be split in a particular way. Therefore the pre-nup can account for future property and future debts.
In relation to who should initiate the pre-nup, it can be you or your partner. Both of you would need to instruct your own solicitors. One side will draft the initial pre-nup and the other side will review it and negotiate if any terms aren’t agreeable.
“I’ve been with my husband for 24 years and we have a prenuptial agreement in place, that we review every 5 years. I’ve recently found out that he has been having an affair and I’m wondering if the reason for our separation will affect the prenup.”
No, not only does the reasons for separating not affect the pre-nup, but apart from rare cases, it won’t affect any financial matters in relation to the divorce. The only times that this behaviour will be considered, is if for example, your husband gambled away a lot of the marital funds. In that type of situation, the court may consider this in the financial split.
“I entered into a prenup with my husband 4 years ago. It has now come to my attention that my husband, at the time of signing the pre-nup, misrepresented his career prospects.”
Other than those mentioned before, there are other considerations that may impact whether a nuptial agreement is upheld, such as evidence of fraud or misrepresentation at the time the agreement was entered into.
However, provided the terms of the agreement are substantially fair and the needs of the parties and the children have been met, the Courts are increasingly willing to uphold and/or give significant weight to nuptial agreements.
“My wife and I got married in another country (Spain) 17 years ago and we had a prenuptial agreement drawn up there. We moved to England around 10 years ago and when I look at the contents of the prenup and how it was created, although we did exchange financial disclosure and got legal advice, my wife now does not agree with the contents. We are divorcing in the UK – does our foreign prenup hold any weight?”
This scenario is very similar to a case that happened in 2018 – Versteegh v Vertseegh. This case involved a Swedish prenup coming before the English court.
Similar to the person who has written in, the wife and husband got married in a foreign country (Sweden) and then moved to England for over 21 years. They then started the divorce proceedings here. On the day before the marriage, the parties signed a pre-nuptial agreement, constructed in standard terms and executed in accordance with Swedish law. What was interesting is that the wife did not obtain legal advice. Whilst she thought she had understood the terms of the document, she wrongly believed that the agreement applied to and protected non-matrimonial assets only.
At first instance, the wife was awarded a shareholding a small percentage of the business created and run by the husband under a trust structure and approximately half of the remaining assets (£51.4m).
The wife appealed. It was her case that the judge should have ignored the pre-nuptial agreement in its entirety and instead “approached the case as if it were a pure sharing case in which fairness required the wife to receive an equal division of the assets, less only her proposed 15% reduction to acknowledge the non-matrimonial property held by the husband.”
In particular, the wife argued that she had not received legal advice as to the discretionary approach taken in the English courts with respect to the division of assets on divorce and, in the absence of this advice, that she should not be held to the agreement.
The decision of the court of appeal was, simply put, because the wife had not appreciated the discretionary nature of the English regime, this is not enough to disregard the pre-nuptial agreement, which was signed in a country where such documents are commonplace and legally enforceable. The court found that the wife was well aware of the effect that the pre-nuptial agreement would have had on divorce, despite not having received legal advice at the date of signing the document.
Therefore the foreign prenup was upheld despite a the wife not receiving legal advice in Sweden. The court does have some discretion and said that as the wife was aware of the full effects of the pre-nup and in Sweden it would’ve been upheld, the same applies here.
If we look at this the other way round, say you have a UK prenup but move country, it is not guaranteed that in the country you move to the prenup will be recognised. So, if you do decide to divorce in another country it’s wise to seek advice about the impact that could have on any prenuptial agreements drawn up in the UK.
When you’re making your decision, you should consider where the prenup was written and whether it is likely to be recognised by the court in that jurisdiction. It’s vital to get advice from a specialist international divorce solicitor about which jurisdiction would help you achieve the best outcome for you and your family.
“My partner and I aren’t married, however I would like to protect our assets that we have acquired jointly and separately. Is there a way we can do this without getting married.”
YES – this would be in what’s called a cohabitation agreement. If you are living with a partner who is not your spouse, your financial rights will be complex and uncertain. Therefore, similarly to a prenup the cohabitation agreement sets out what would happen to the assets in the event that you break up and stop living together.
The cohabitation agreement is very beneficial when trying to establish matters such as:
- Who shall pay for the upkeep and bills in a property, and how
- Who owns a share in a property and in what proportions
- What will happen in the event of a separation
- Who shall pay certain debts
- Who shall be nominated for death-in-service benefits.
If any of the information in today’s webinar or the scenarios mentioned are of interest to you please contact us at RVS solicitors to arrange an initial consultation. Call us on 020 3372 5125 or contact us by filling our contact form.