Guide to pre-nuptial agreements (prenups)
Vardags made history in 2010 as the landslide victors in the Supreme Court case of Radmacher v Granatino which changed the law on prenuptial agreements in England and Wales so that they are now enforceable unless unfair. Huge payouts and unpredictability have made England the “divorce capital of the world”. In that climate of tension for couples, some have been discouraged from marrying because of financial exposure. Others fear the acrimony of a messy fight over money and want to try to make sure that if things do not work out, they can resolve matters in a pre-agreed amicable manner. The best solution for reducing uncertainty and risk is a prenuptial agreement. The zeitgeist has changed so that prenuptial agreements are, as has long been the tradition in the rich or aristocratic families of Europe, becoming common among couples in England in recognition of mutual autonomy and a desire to avoid the unpredictability, pain and cost of litigation.
In the event that the court is asked to look at making financial provision for each party upon divorce, the general approach will be to evaluate the assets acquired during the marriage and to divide these assets in a manner that the court considers to be fair. This is checked against a premise of a 50:50 division, with no discrimination between breadwinner and homemaker. If the needs of either party cannot be met by such a division of marital assets, then the court will look to the ‘non-marital assets’, such as inheritance or pre-acquired assets, of the wealthier party in order to meet the needs of the other. Needs will be generously interpreted where there is the wealth to do so and will take into account the standard of living enjoyed during the marriage.
Following Radmacher v Granatino, you can expect your prenup to be a prepared agreement, executed voluntarily in a timely manner. Legal advice will be given on both sides and full financial disclosure will be upheld by the courts, provided that the agreement remains fair in the circumstances that exist at the date of enforcement. The Supreme Court did not define the term “unfair” but, as the case law in this area has developed, fairness is interpreted as meeting the parties’ reasonable needs. These needs can be restricted by a prenuptial agreement. It is, therefore, well worth drawing up a prenup and checking throughout its existence that it remains fair and has the maximum prospect of enforcement should that become necessary. Your prenuptial agreement may involve maintenance or provision of a home on trust while children are growing up.
Although the discretion of the courts has not been ousted altogether (and in particular the court has jurisdiction to make provision for children, which cannot be ousted), the Supreme Court has gone a long way to achieve a balance of power between the people and the courts by allowing people autonomy to make decisions in respect of their own finances in the event of divorce. This is an extremely valuable change to the law of England and Wales and has brought us closer in line with many other countries where prenuptial agreements are already binding, and in some cases, have been for many years.
Therefore, where prenuptial agreements might have seemed unromantic in the past, they are now becoming more and more popular with people choosing to protect their assets and as Katrin Radmacher put it, “marrying for love, not money”.
If you are interested in discussing a prenuptial agreement please see How Vardags can help with pre-nuptial agreements.