Love and pre-nuptial agreements in the air

By Victoria Strode, Associate Solicitor & Head of Family at Mogers Drewett.

Valentine’s Day is a time for celebrating love and romance and is well known as one of the most popular days for new wedding proposals. In fact, a recent survey found that 23% of women want to be proposed to on February 14th following a survey of 10,000 people across the UK.

It’s understandable that in the early stages of a relationship, few people want to consider what will happen to their assets and liabilities should the marriage or partnership fail, but the reality is that today more and more people are protecting themselves, and their assets, through prenuptial agreements, cohabitation agreements (for those not actually marrying) or sometimes postnuptial agreements (if already married).

In the best case scenario the agreement may never be needed, and in the worst case scenario it may save you the emotional and financial drain of contested Court proceedings.

These sorts of agreement can be seen as another form of marriage preparation, although much like an insurance policy, hopefully you never need to use it. They can also provide individuals with the opportunity to freely follow their heart whilst protecting owned or yet to be acquired assets.

Whether a couple is intending to marry or cohabit, once the arrangements are settled parties will naturally allow their finances to become entwined. Once the enmeshing starts it becomes difficult to understand who brought what to the relationship. If you are able to consider an agreement prior to living together you can set out clearly in a document the ownership of all assets and make provision for how future assets will be owned, even if you have children.

Pre-nuptial agreements are not legally binding, but on divorce the court will need to consider financial separation and when doing so will give weight to any agreement that has been reached.

An agreement can offer clarity to the court as to the ownership of the assets and provide certainty as to how they ought to be divided. These agreements can save money in limiting arguments following separation and protect assets. They may not be legally binding but they can be persuasive.

The validity of these agreements has developed following the Supreme Court decision in Radmacher v Granatino in 2010. The key points of the current law are as follows:

  • When considering the role of a pre-nuptial agreement in a financial claim on divorce, the starting point is the relevant legislation, which is the Matrimonial Causes Act 1973. Section 25 of that Act obliges a judge to consider all the relevant circumstances of the case when deciding how to divide the parties’ finances.
  • No agreement between the parties can override the legislation or prevent the judge from deciding on the appropriate division of assets. This means a pre-nuptial agreement cannot stop a spouse applying to the court for financial provision from the other spouse. Any waiver of the right to apply to the court for financial provision in an agreement will not be effective.
  • The significance of a pre-nuptial agreement is as a relevant circumstance of the case, to be weighed by the judge. A pre-nuptial agreement will have a substantial impact on the judge’s decision in many cases. The Supreme Court said in Radmacher v Granatino 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 circumstances prevailing it would not be fair to hold the parties to their agreement.

Both parties need to enter into an agreement with free will and without pressure. Usually one party will be financially weaker than the other and the ‘stronger’ party will want to protect their family assets so that there is often an imbalance. However, there must not be any evidence of pressure being asserted on the weaker party and therefore the agreement will be scrutinised by the court for evidence of mistakes, duress, undue influence, misrepresentation or ‘unconscionable conduct’, such as exploiting a dominant position to secure an unfair advantage.

If parties seek appropriate legal advice, and enter into financial disclosure prior to signing the agreement then the court is more likely to give the agreement the weight it was intended to have.

There has been mounting pressure for parties to be able to regulate their finances and the Law Commission recommended the introduction of ‘qualifying nuptial agreements’ in 2014 which suggested that pre-nuptial agreements be binding, provided a number of requirements have been met.  These recommendations are still under review.

If you or a member of your family have recently become engaged or decided to live together, then prior to moving forward it really is advisable to think about what would happen should the relationship end. This is easily discussed at the outset but not so easy when the relationship finds itself in difficulties.

Mogers Drewett

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