Every so often there is a high profile wedding or divorce which highlights throughout the media the role of prenuptial agreements. It is certainly the case that more couples are entering into a prenuptial agreement before they marry. In early 2016, when Cheryl Cole’s marriage broke down, there was a lot of speculation in the media as to whether she and her husband had entered into a prenuptial agreement, and if they hadn’t, what the extent of his potential claim against her might be.
A ‘pre-nup’ is a formal agreement which a couple signs before their marriage, or civil partnership, which details how they would want their finances to be shared if they separated or divorced.
From reading the media stories, one might be forgiven for thinking that it is only the rich and famous who enter into prenuptial agreements. However more and more couples with both modest and significant assets are entering into prenuptial agreements. They are also particularly useful for individuals who have children from previous relationships, have inherited assets which they want to ring-fence, or are likely to inherit assets in the future.
The legal position as far as prenuptial agreements is concerned remains that they are not automatically binding and watertight. A prenuptial agreement does not prevent a court within divorce proceedings from considering the financial position of the couple. However, more and more Judges are prepared to adopt the terms of a prenuptial agreement, or largely follow them. In order for a prenuptial agreement to be upheld by a court, there are certain formalities which must be complied with. These include:
- Both spouses must seek independent legal advice
- The agreement must be signed at least several weeks before the date of the wedding
- Both spouses must make full financial disclosure
- Neither of them must be put under any pressure to sign the document.
Prenuptial agreements are often entered into by couples who want to either ring-fence assets which they already have, or want to agree at the beginning of their marriage or civil partnership what will happen if they separate, to avoid a huge battle at that stage. Prenuptial agreements can deal with assets which are accumulated during the course of the marriage, as well as assets which exist at the time that the agreement is entered into.
If the couple already have children, or there is a possibility that they might have children, it is very important that they consider as part of the prenuptial agreement what financial provision will be made for the children.
It remains a very difficult conversation to have with your future spouse or civil partner, but as the concept of prenuptial agreements becomes more known, the easier it is to have that initial conversation. Occasionally, individuals are reluctant to enter into a prenuptial agreement because they don’t want their future spouse or civil partner to know the extent of their wealth. Unfortunately, unless that financial disclosure is made, the prenuptial agreement will almost certainly not be upheld by a court.
The law commission did consider a couple of years ago whether the law should change in respect of prenuptial agreements so that they were automatically binding and enforceable in certain circumstances. It seems unlikely that there is going to be any change in the legal status of prenuptial agreements in the foreseeable future. However they remain a valuable document to many couples, even though they may not be top of their wedding gift list.