In 2012 The Law Commission is due to report on whether a change in the law should be made to ensure pre-nuptial agreements are fully enforceable
So does that mean that at the present time pre-nuptial agreements are not legally binding?
Despite the press headlines following the Supreme Court’s judgment in the case of Radmacher (formerly Granatino) v Granatino, it is clear the Supreme Court was in no doubt that a pre-nuptial agreement could not overrule the jurisdiction of the court.
On 20th October 2010 the Supreme Court gave judgement in the case of Radmacher (formerly Granatino) v Granatino. This well known case involved a German wife and French husband. The pre-nuptial agreement was made in Germany before a Notary three months prior to the marriage. The agreement was made at the instigation of the wife, who came from a very wealthy family and to whom a further portion of her family’s considerable wealth would be transferred as and when the husband signed the agreement. The agreement was subject to the law of the Federal Republic of Germany.
When the the parties divorced in 2006, the husband declined to take independent legal advice on the document. The husband he had no idea of his wife’s wealth and had not received proper legal advice, nor had the German agreement been translated for him before it was signed. In France and Germany pre-nuptial agreements are entirely normal and routine. This is a factor the Supreme Court took into consideration. The effect of the judgement is to give compelling weight to pre-nuptial agreements entered into by the parties, subject to certain safeguards. Lord Phillips, giving the leading judgement, held that, “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 prevailing circumstances it would not be fair to hold the parties to their agreement”.
It is likely an agreement would not be held binding in cases where:
(a) There is a child of the family, whether or not that child was alive, or a child of the family at the time the agreement was made;
(b) One or both of the parties did not receive independent legal advice before entering into the agreement;
(c) The Court considers the enforcement of the agreement would cause significant injustice to one or both of the parties or to a child of the family;
(d) One or both of the parties have failed to give full disclosure of assets and property before the agreement was reached;
(e) Under the general law of contact the agreement is enforceable, including if the agreement attempted to lay an obligation on a third party who had not agreed in advance;
(f) An agreement is made fewer than 21 days prior to the marriage (this would prevent an anti-nuptial agreement (an agreement made prior the marriage) being forced on a party shortly before their wedding day (i.e. they may feel unable to resist the pressure to sign the agreement).
Elements of unfairness which might result in a pre-nuptial agreement being upheld would include:
(a) Cases where there is a failure to meet the reasonable requirements of any dependent children;
(b) If the prenuptial agreement left one party in a predicament of real need;
(c) If circumstances have changed over the course of the marriage in ways or to an extent which either party cannot have envisaged. This is particularly likely to be the case in long marriages.
Currently, these agreements are seen as to be the preserve of the rich. It is true that asset protection of a wealthy person is a common reason for this type of agreement, however, the protection works equally well for people in all income brackets. The primary reason for a pre-nuptial agreement is to protect assets belonging to one of the parties prior to the marriage. People who are entering into second marriages frequently request a pre-nuptial agreement to protect assets they have built up prior to the marriage. People who inherit their deceased parents’ property are also anxious the inherited property is not brought into the matrimonial pot. These agreements can also protect children from previous relationships – the agreement can be used to guarantee certain property or other assets will still go to the intended heirs and are not caught up in the marital property division.
Not everyone due to marry has considerable assets. In fact, many people choose to marry despite the fact one of the parties in the relationship has a chequered financial history. In this situation a pre-nuptial agreement can legally protect the other party in the relationship from previously accrued debt, and can separate debts as well as assets.
You cannot deal with child custody in a pre-nuptial agreement, even if the couple already have children prior to the marriage. Contact arrangements also cannot be included. It is also not permitted to include clauses which may encourage divorce, nor include any details that are unfair or not allowed by law.
Given the judgement handed down in the Radmacher v Granatino case, it is believed there will be an increase in the number of pre-nuptial agreements being prepared. This will result in it becoming increasingly important to put a value on the assets each party brings into the marriage at the date of the preparation of the agreement. The purpose of the agreement is to attempt to limit the ability of one spouse to ‘walk away’ with any portion of the pre-marriage wealth. In cases where there are companies or considerable assets involved, it is important to obtain valuations at the date of the marriage. Without valuations it would be very difficult for a Court to ascertain the true value of the assets each party brings to the marriage.
We hope this update regarding recent changes in pre-nuptial agreements will help you to make fully informed decisions when it is time to do so. For expert advice on marital law, call Howells Solicitors today on 0808 178 2773.
by Richard Scott