An ultimate guide to Pre-Nuptial agreements

Pre-nuptial agreements (often known as “Pre-nups”) are an increasingly used legal tool to attempt to provide protection and clarity in the event of a separation following a marriage or civil partnership. It is never a bad idea to be organised about your finances, and to start your marriage or civil partnership with peace of mind. 

In this Ultimate Guide, we will explain everything you need to know about pre-nuptial agreements: 

• What are pre-nuptial agreements 
• Who can have a pre-nuptial agreement 
• What can be included in a pre-nuptial agreement
• Benefits of a pre-nuptial agreement 
• The legal process 
• Alternatives
• Frequently asked questions 

What are pre-nuptial agreements?

A Pre-nup is a document which sets out what should happen to assets held by the couple in the event of divorce or dissolution of a civil partnership. Pre-nups are not legally binding in England and Wales; but they can be important evidentially to show what the couple intended when they embarked upon their marriage. It is not possible to oust the jurisdiction of the court.

It can apply to all current and future assets and income, to include property, income, debt, inheritance and more. 

Upon getting married, any assets you own can become matrimonial assets. What this means is that in the case that the marriage comes to an end, these assets can be shared between the spouses, regardless of who owned them prior to the marriage. Both parties can claim any of the assets. What a pre-nup can do is prevent certain assets from becoming ‘matrimonialised’ meaning that upon separation, your ex-spouse would not be able to claim a right to them.  Any assets can be protected in this manner, they do not need to be high value assets. 

Who can have a pre-nuptial agreement?

Anyone can enter into a pre-nup, they are not reserved for the rich and famous trying to protect their assets from a less wealthy spouse. 

Anyone looking for future certainty, and to avoid the stress of determining the allocation of financial resources in the event that the marriage is to come to an end. 

A pre-nuptial agreement can be particularly useful for those in situations where: 

• One of you have substantially greater income or capital than the other 
• One of your is expecting significant inheritance that you wish to protect 
• One or both of you wishes to protect assets owned prior to the marriage or civil partnership 
• In your situation it would be beneficial to define what is considered to be ‘matrimonial property’ or ‘non-matrimonial property’, for example where there are business assets owned by one of you prior to the marriage or civil partnership. 
• One or both of you have children from a previous relationship and you wish to protect assets for inheritance planning 
• One or both of you have property or assets in another jurisdiction. 

Where one of the above situations apply, a pre-nup can be particularly useful as one spouse stands to be greatly affected by a divorce, if it was to occur. 

What can be included in a pre-nuptial agreement?

Some things you may want include within a pre-nuptial agreement are: 

• What will happen to property that either of you have brought into the marriage or civil partnership 
• What will happen to the family home 
• What will happen to any property given to you or inherited during the marriage or any income or assets derived from trusts 
• What will happen to any money or property held or purchased jointly 
• What will happen to personal belongings owned prior to the marriage or acquired during the marriage 
• What will happen to any money saved or earned during the marriage 
• What will happen with your pension 
• How you will deal with any debts 
• Whether either of you will pay or receive maintenance, and for how long 
• Any events that may require the agreement to be reviewed 
• If you would like the agreement to be confidential (save for the purpose of taking legal advice) 
• What kind of arrangements you may wish for your children 
• What kind of arrangement you would like to make should either of your die during the marriage and whether you intend to enter into a will to make provision for each other in the event of death 
• Who will pay the costs regarding the preparation of the pre-nuptial agreement. 

The great thing about a pre-nuptial agreement is it can largely be tailored to what is important to you and your spouse, depending on your own financial situation. 

What are the benefits of a pre-nuptial agreement? 

Everyone has their own reasons for entering into a pre-nup, you may simply want to be as organised as possible about your finances, it may be for peace of mind – it does mean that you are any more likely to separate. It simply gives clarity if a separation were to arise. 

The process of resolving financial matters upon divorce can be lengthy, and expensive. Many who have been through this process will attest to the benefit of doing anything you can do to avoid it. This process can involve multiple court hearings, where parties may need to pay for representation in the form of legal counsel, in addition to solicitor’s fees. The situation can be stressful, and it is easy to feel out of control, leaving the future of your finances at the large discretion of a judge. Things can become protracted, turning what may have been an amicable split into a tense disagreement. Whilst a pre-nup cannot guarantee the outcome of a financial settlement dispute, it can be very persuasive, and give you back control. It means that your finances may be able to be dealt with without ongoing acrimony, and without substantial costs. 

The legal process 

As stated above, Pre-Nuptial agreements are not legally binding, but they will be taken into consideration by the court, and they can hold a lot of weight. The courts increasingly are holding couples to  well-drafted and fair pre-nups, provided that certain requirements are met. 

These requirements are as follows:

• The agreement should be fully signed up at least 28 days before the nuptials. Although this is not an absolute requirement, it is relevant to the last item on this list.
• Both parties have had separate legal advice about the agreement before entering into it. 
• Full financial disclosure has taken place between the spouses prior to entering into the agreement 
• Neither party was subject to duress or undue pressure to enter into the agreement  

Each party’s signature must be witnessed by an independent witness, when executing the agreement.

The pre-nuptial agreement must be entered into freely and willingly by both parties, it must be contractually valid (without undue influence or misrepresentation), it must be made by a deed and contain a signed statement by both parties that they understand that it is and enforceable agreement that will partially remove the court’s discretion to make financial orders. 

The agreement must not have been made within 28 days before the marriage or civil partnership. Both parties must have received disclosure of material information about the other party’s financial situation, prior to making the agreement. Both parties must have received legal advice, the terms of the agreement must not prejudice the reasonable requirements of children. 

Financial arrangements will likely be the main focus of the pre-nuptial. 

Whilst they are not formally binding, pre-nups are persuasive and even ‘decisive’ in the eyes of the court when resolving the financial affairs. 

The pre-nup will either form part of the circumstances that the court has a duty to consider or will be viewed as conduct it would be inequitable to disregard. 

A pre-nup must be fair in order for you to rely upon it in court. 

An agreement is less likely to be considered unfair if it is recent, or if circumstances have not changed since the agreement was entered into, and if both parties were fully informed when entering into the agreement of the financial and legal consequences, without any undue pressure being applied. 

It is common to incorporate into the agreement, a provision for the agreement to be reviewed, either after a period of time has elapsed or at the occurrence of a specific event, e.g upon the birth of a child or upon the retirement of an individual. 

It is possible that a court may uphold parts of the agreement, and disregard other parts that it views to be unfair. But the likelihood of a court disregarding a pre-nup is significantly reduced where the pre-nup is drafted by an experienced family lawyer who can help ensure the agreement is fair and that both parties are sufficiently aware of its consequences. 

Legal formalities help to show that upon entering into the agreement, both parties intended it to be binding upon them. This will help a pre-nup be persuasive in the event that it must be assessed in court. 

Alternatives to pre-nuptial agreements

If you don’t have a pre-nup, then the assets of you and your spouse will be divided according the law in England and Wales, the court will look at various factors, such as the length of the marriage, the needs of the parties and any children and the contributions made by spouses to the marriage. The court will act based on what is fair and equitable, but the courts have a lot of discretion, it can be difficult to predict how a judge will choose to divide the assets and you have little control over their decision. 

Alternatively, A post-nuptial agreement can be entered into after the marriage has taken place. A post-nuptial agreement is open to be scrutinised by the courts as to whether it is enforceable, to a far larger extent than a pre-nuptial agreement. It may be a lot easier for one spouse to argue against the upholding of a post-nuptial agreement, in claiming they were under undue pressure, than with a pre-nuptial agreement, in that the spouse may claim they had little choice but to agree, once they were already married. 

Frequently asked questions 

What happens if we have children? 

The important thing to note is that a pre-nuptial agreement cannot prejudice the interests of any children. Upon divorce, the needs of your children will always be the first consideration, regardless of what has been agreed in a pre-nuptial agreement. This means that you can enter into a pre-nup without the worry that you will be inadvertently affecting your future children as their needs will be considered prior to upholding any of the terms of your agreement. But this also means that you cannot use a pre-nup to ‘opt-out’ of providing financial assistance to any future children. Once children have been adequately and fairly provided for, the remaining assets and debts can be divided according to the terms of the pre-nup. So, it is still worth having a pre-nup, even if you intend to have children. 

What cannot be included in a pre-nuptial agreement? 

You cannot include anything that would be contrary to ‘public policy’ such as you cannot put that the court will not be able to consider financial issues should the need arise, and you cannot put that you restrict any financial provision for children. 

A pre-nup cannot include details about child custody or support, but it can protect your inheritance or specific assets in the favour of your children.  

The agreement will need to include a declaration that you have each provided the other with financial disclosure. Your family solicitor will be able to guide you through the disclosure process, the aim is to ensure that upon entering the agreement, you able to do so with full knowledge of the other party’s financial situation and therefore understand the implication of the agreement. 

The agreement only becomes effective upon you entering into a valid marriage or civil partnership. 

A pre-nup can provide a false sense of security, in that it is not possible to prevent the court from determining the allocation of assets upon divorce. You cannot use a pre-nup to create an unfair outcome. Whether you have a pre-nuptial agreement or not, once you enter into a marriage, if that marriage comes to an end your assets must be divided fairly in a way that ensure both parties have their needs met. 

How much does a pre-nuptial agreement cost? 

Whilst a pre-nuptial agreement will incur a cost, this must be balanced against the value of assets that could be lost by a spouse upon divorce, and against the cost of going through the court process upon divorce to resolve financial issues. The costs will vary greatly depending on the complexity of the issues you want to include within the agreement. It is always worth incurring the cost of independent legal advice for both parties, as without this the pre-nup may not be upheld by a judge, wasting any costs that were spent on its preparation. 

What if there are international elements? 

If either you, your proposed spouse, or both, have a connection with another country, either through assets, domicile, habitual residence or future plans, and your considering entering into a pre-nuptial agreement, it is very important to instruct a specialist family lawyer in each relevant county to advise you on the need for and effect of the agreement in that country. 

The approach of courts in the enforcement and validity of pre-nuptial agreements can vary dramatically between countries, and whilst your agreement may be considered fair by the court in England and therefore used to divide your assets upon separation, it may be entirely disregarded by a court in another country. This is why it is very important to seek legal advice from a lawyer from that country before choosing to incorporate any international issues into your pre-nuptial agreement. It may be that a separate pre-nuptial agreement will need to prepared in the country that you wish for it to apply, other than England and Wales, or you can confirm in your pre-nuptial agreement that you wish for it to be enforceable In another country in addition to England and Wales, if the agreement has been drafted comprehensively to incorporate international elements. 

What happens if one party no longer wishes to be bound by the terms of a pre-nuptial agreement? 

The person who no longer wishes to be bound may, upon a divorce, make an application to the court, so that they can explain to the court why an order should not be made in line with the terms of the agreement. It will then be up to the court to decide whether the reasons given for the pre-nup to not be honoured are sufficiently persuasive. The court may disregard this argument and honour the terms of the agreement, especially if it does not call into question the fairness of the agreement. Therefore it is important not to enter into a pre-nup if you do not intend to be bound by the terms. But this does also provide some peace of bind in that entering into a pre-nup can be worthwhile, as one party cannot simply choose not to be bound anymore, provided the agreement is fair.  

by Holly Stapleton