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Wedding Bells or Alarm Bells?
Tracy Lambert of Tozers considers prenuptial agreements.
Tozers’ family team are being asked to advise on an ever-increasing number of cases where couples are contemplating marriage but want to preserve or protect previously acquired assets.
This has been particularly relevant to second or subsequent marriages where one party wishes to protect assets following their experience of divorce, or where parents are concerned that their adult children may be exposed financially by entering into a marriage where there is an uneven distribution of wealth.
Whatever the circumstances, there is often good reason to take steps to protect and preserve family wealth. Some see it as an insurance against the consequences of a divorce system which often favours a party who has brought little into the marriage. With nearly half of all marriages ending in divorce, a prenuptial agreement is a sensible precautionary measure.
Often, the terms of a prenuptial agreement provide that assets brought into the marriage should remain in the sole ownership of the party that owned them and that, going forward, only the wealth that is accrued jointly during the marriage should be shared between the parties on any subsequent separation.
In order for the agreement to be effective, it is essential that certain criteria are met.
These criteria require that both parties have obtained independent legal advice. A solicitor is only able to advise one party to the agreement, so it is crucial that both parties seek their own independent legal advice.
It is also important that there has been full and frank financial disclosure. Both parties are required to make disclosure of their financial positions prior to entering into the agreement. This means that they disclose their capital, income and pension position. A schedule would normally be attached to the agreement for each party to set out all the assets that the parties own and to provide details of their respective capital, pension and income positions.
This openness is a key factor in ensuring that the agreement can be upheld at a later date. The court does not look favourably upon parties who have failed to disclose the extent of their assets.
There is also the need to establish that the agreement was freely entered into; that is to say that there must be no duress or undue pressure on one party to enter into the agreement. This brings us back to the need for the other party to take independent legal advice, as the solicitors are required to certify that each party is entering into the agreement freely.
The agreement must be entered into at least 21 days before the date of the marriage, but ideally, it would be executed 28 days before. This is intended to safeguard against the duress argument above.
Additionally, the agreement has to be ‘fair’ and within the range of possible outcomes that a Judge might award on divorce. The further away from the principle of fairness, the less likely that the agreement would be upheld, particularly if there are dependent children.
Legal position on enforceability has become much clearer in recent years following the landmark case of Radmacher (formerly Granatino)-v-Granatino. In that case, it was said that the parties intended the agreement to be effective and ‘as intelligent people, were aware of its obvious purpose. In an assessment of the sharing principle and the impact of contributions, the agreement was a good and powerful reason for departing from equality and was an important factor to be weighed in the balancing exercise’.
In another recent case of Luckwell-v-Limata, it was said that where the primary purpose of the agreement was to protect from a subsequent claim against the wife’s inherited property, this was ‘an entirely reasonable ambition, and militated in favour of giving weight to the agreement’. The husband was under no special pressure to agree. For the wife, signing the agreement was a condition of entering into the marriage. In the circumstances, it was said that it would be fair to hold the husband to the parties’ agreement unless his needs dictated a different outcome.
Accordingly, whilst the agreement cannot prevent the court from considering the situation, courts seem increasingly willing to give effect to properly prepared prenuptial agreements.
Factors for departure
There are factors that could result in a departure from the terms of the prenuptial agreement, and it is recommended that the agreement is kept under review. The arrival of children and other significant events may well impact upon the enforceability of the agreement. Likewise, if the other spouse is able to show real financial need, then there may be good reason to depart from the terms of the agreement in order to ensure that those needs are met.
However, the existence of a properly drafted prenuptial agreement should help to give some measure of protection and peace of mind.
With thanks to the British Holiday & Home Parks Association Ltd for allowing us to publish this article on our website. Originally published in BH&HPA Journal Issue 185- 2017.4 Pg55. Visit the BH&HPA website here: http://www.bhhpa.org.uk/ .
If you any advice regarding a matter like this, then please do not hesitate to speak with our experienced team of family law solicitors in Exeter.