Pre-nuptial and Post-nuptial Agreements
Pre-nuptial Agreements
Over the last few years there has been a steady increase in the number of couples who wish to regulate their financial arrangements on divorce, recognising the high incidence of marriage breakdown. A common arrangement in Europe and in the USA, Pre-nuptial Agreements are catching on in England and Wales. They have been given greater impetus by recent Court of Appeal and High Court decisions regarding the way in which a couple should share their assets in divorce.
Although they are not binding on a Court in divorce or judicial separation (where the Court retains an unfettered discretion to make such Orders as it considers appropriate), "Pre-nups" are viewed as a significant factor which the Court should take into account. Any decision as to whether or not Pre-nups become legally binding is for Parliament, and the issue is about to be considered by the Law Commission, with a draft Bill expected in 2012. The matter has recently been considered by the Privy Council and in light of that it is important to consider regularly reviewing and re-executing such Agreements, known in that case as Post-nups.
Until this summer there was a growing body of opinion that it would not be long before the higher Courts lay down guidelines, based upon which they would be more likely than not to approve an Order in the terms of the Pre-nup. These factors are likely to include:-
(a) a full and frank exchange of financial circumstances by the couple;
(b) separate independent legal advice for each party;
(c) the completion of the Pre-nuptial Agreement at least 21 days before the marriage.
However, there has been a Court of Appeal decision (Radmacher v Granatino 2009) which has cast some doubt on the safeguards required, and which is going to have a major effect on future judicial treatment of Pre and Post marital agreements. In that case the Court felt that it was a ‘legitimate exercise’ of the very wide discretion of the Court to give significant weight to an Agreement made. In that case some of the safeguards that we have previously relied upon, such as both parties having to have had independent legal advice and sufficient consideration time, were not present.
Therefore, a pre-nup entered into voluntarily and freely, perhaps even with one party having no legal advice, will probably be given significant, perhaps even very significant weight when considering the financial settlement on divorce.
It should be noted that the Radmacher case involved parties who were from countries where Pre-nups are the norm and binding; there is likely to be a different approach taken where one or both of the parties are from England. The case is expected to go to the House of Lords who will give further guidance on the impact of Pre-nups in England and Wales.
The team at Lyons Davidson has considerable experience in drafting Pre-nuptial Agreements and will readily do so, meeting with the other party and their legal advisors to ensure that a document is prepared that is acceptable to all.
Contact: James Myatt or Louise Higham