When is a pre-nuptial agreement justified?

Rebecca Patience, family law solicitor based at our Lancaster office, outlines the instances in which a pre-nuptial agreement could protect individuals in the event of divorce.

Whilst perceived by some couples as unromantic, a pre-nuptial agreement can be an essential tool to circumvent unforeseen situations which may occur when a relationship breaks down in the future.

A Supreme Court Judgment in 2010 confirmed that as long as ‘a pre-nuptial is freely entered into by each party, with full appreciation of its implications, and it is fair to uphold the agreement in the prevailing circumstances’ then the courts are likely to give effect to the agreement.

Here is a list of circumstances that may warrant preparing a pre-nuptial agreement prior to marriage:

1. Protect an individual with high earning capacity

Labelled the ‘most expensive divorce in history’, Jeff Bezos (founder of Amazon) recently experienced the harsh reality of his failure to ring-fence the wealth he generated throughout his career. As part of their divorce settlement, his wife received a 4% stake in his online business valued at over £29bn.

Jeff’s experience demonstrates why it is important to ensure your personal wealth is protected should there be significant disparity between you and your partner’s earning capacity.

2. Provisions regarding children

In the case of a second marriage, pre-nuptial agreements can set out your intention to continue to provide for your children from a previous relationship, in the event of divorce.

Even in the instance of a first marriage, pre-nuptial agreements can contain clauses regarding child support, medical insurance, education costs or personal child-raising issues.

3. Personal assets

Tailored to fit a couple’s personal circumstances, pre-nuptial agreements usually contain an inventory of each partner’s assets and details of how they are to be dealt with in the event of a marriage breakdown.

This agreement can include among other things, high valued items such as jewellery, cars and family heirlooms as well as property, investments, pensions and savings.

4. Inherited wealth

Pre-nuptial can also help protect inherited assets and/or future inheritances from being accessed by an ex-spouse as well as ensuring the inheritance(s) remain within your family after a divorce.

5. A partner with substantial debt

Pre-nuptial agreements with a ‘debt clause’ may help limit your debt liability if your partner has an accumulation of substantial debts. Equally a pre-nuptial can also protect your from being affected by your spouse’s poor credit history, which you may not be aware of.

6. Protect business shares or ownership

A pre-nuptial can help isolate equity you may own relating to a family or private business. This can be an essential consideration for business owners who have worked hard to establish a successful, profitable business.

7. Distribution of the matrimonial home

To avoid a lengthy post-divorce legal battle, a pre-nuptial can set out how the parties wish for the marital home to be divided if the relationship breaks down. The drafted agreement will give guidance to the entitlement of each spouse.

This could be a consideration if unequal contributions have been made towards the purchase of a property. For example: an agreement can be made in writing that if the relationship breaks down, each spouse receives a fixed percentage of the value of the marital home.

Preparing a pre-nuptial

Regarding timescales, any pre-nuptial agreement should be finalised as far in advance as possible of a marriage or civil partnership and ideally no later than 28 days before the marriage, as recommended by the law commission to prevent an ‘under duress’ argument.

If you are engaged to be married and think a pre-nuptial agreement may necessary in your circumstances, it is advisable to seek legal advice as soon as possible.

The legality of a pre-nuptial

Whilst the supreme court has endorsed the use of pre-nuptial agreements, to demonstrate the intention of marrying couples, it should be highlighted that pre-nuptial agreements are not legally binding agreements.

Parties to a marriage cannot oust the jurisdiction of the court and so, if at the time of separation, the agreement seems grossly unfair, the family court judge retains power to overrule the agreement.

Whilst there remains an element of uncertainty as to the binding nature of pre-nuptial agreements, entering into such an agreement can be very persuasive evidence to the court should the marriage breakdown.

It is also recommended that pre-nuptial agreements are reviewed periodically during the marriage, to ensure they are up-to-date, and reflect the current circumstances between parties and to increase the likelihood that the agreement will be upheld by the court.

See related posts: Five steps to making a pre-nuptial agreement and Are millennials driving the increase in pre-nups?

If you require any further advice regarding pre-nuptial agreements or to seek specialist legal advice from Harrison Drury’s family law team please contact Rebecca Patience on 01772 258321.