With the excitement of planning your wedding the last thing you'd want to consider is drawing up a pre-nup. It's not very romantic to think about what will happen in the event of a break up, but it's important to be realistic about this. Statistics show that one in three marriages break down within the first five years. Breakups are expensive and if you own a home, have your own business or assets such as investments and pensions, you may want to sit down with your partner and discuss what would happen in the even that you split up.
The importance of a pre-nup
By: Carol Barraclough*
By: Carol Barraclough*
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Recent awards in big money cases have raised concerns among those people with extensive assets and they are considering a pre-nuptial agreement to protect their wealth. The Courts are now making larger awards in favour of wives and this is making men think about their financial affairs before entering into matrimony. Equally, wealthy women marrying poorer men are looking to ways of preserving their pre-marital assets. Statistics show that one in three marriages break down within the first five years so pre-marital assets are becoming a major concern.
In 2006 the three principles of need, compensation and sharing emerged from the House of Lords’ judgement in the cases of Miller v Miller and McFarlane v McFarlane. Furthermore, the Court of Appeal in the case of Charman v Charman in 2007 ruled that Mrs Charman could keep the £48 million settlement she was awarded from the family fortune of £131 million, despite £68 million of this being in a family trust. These high asset cases show the increasing need of a pre-nuptial agreement.
The most recent high profile case is Crossley v Crossley, where a pre-nuptial agreement had been entered into, allowing for the parties to walk away from the marriage with the assets they had brought into it. Lord Justice Thorpe considered such agreements to be important “a factor of significant importance”.
Whilst one party might argue that he or she should be given consideration for assets brought into the marriage, the Court may not always agree and still divide equally. A binding pre-nuptial agreement might clarify the position and more judges are taking into account a pre-nuptial agreement as part of the criteria to be considered when dividing assets between the parties.
A pre-nuptial agreement is between parties to an intended marriage and sets out their rights and obligations in relation to any property or other assets and determines what should happen to such assets on any future breakdown of the marriage. It should be entered into no later that 21 days before the wedding day as one party could be left wide open to the allegation of duress and that the other was forced to sign the agreement shortly before the big day.
Pre-nuptial Agreements remain unenforceable under the English legal system (unlike in Scotland, America and other European Countries) and despite pressure from the Law Society upon the Government to legislate in this area, this has so far been resisted. Their use is however encouraged.
So if not legally binding, why have one? The Courts are not ignoring the existence of the agreements and they are increasingly considered a relevant factor. If the agreement closely reflects the position of the marriage at the time of divorce, the more relevant it may be. It is better to have one than not at all. It is vital to have one when the assets of the marriage are of good size and there is an international element where one party seeks to rely on the agreement in another jurisdiction.
A good pre-nuptial agreement must consider the future and be more generous as the length of the marriage increases. It certainly should be revisited on a regular basis to allow both parties to take account of differing circumstances and for the agreement to reflect them. As the agreement is a contract, it needs to conform with general contract principles. It will be of little use if its contents are uncertain and ambiguous or if it is later revealed that the parties did not disclose to each other all the relevant financial details at the time of the agreement. In the event of a marriage breakdown and a pre-nuptial agreement having been signed, the Court will look closely at all of these issues and particularly, whether the parties had independent legal advice.
*Carol Barraclough is a lawyer at Matthew Arnold & Baldwin www.mablaw.co.uk
In 2006 the three principles of need, compensation and sharing emerged from the House of Lords’ judgement in the cases of Miller v Miller and McFarlane v McFarlane. Furthermore, the Court of Appeal in the case of Charman v Charman in 2007 ruled that Mrs Charman could keep the £48 million settlement she was awarded from the family fortune of £131 million, despite £68 million of this being in a family trust. These high asset cases show the increasing need of a pre-nuptial agreement.
The most recent high profile case is Crossley v Crossley, where a pre-nuptial agreement had been entered into, allowing for the parties to walk away from the marriage with the assets they had brought into it. Lord Justice Thorpe considered such agreements to be important “a factor of significant importance”.
Whilst one party might argue that he or she should be given consideration for assets brought into the marriage, the Court may not always agree and still divide equally. A binding pre-nuptial agreement might clarify the position and more judges are taking into account a pre-nuptial agreement as part of the criteria to be considered when dividing assets between the parties.
A pre-nuptial agreement is between parties to an intended marriage and sets out their rights and obligations in relation to any property or other assets and determines what should happen to such assets on any future breakdown of the marriage. It should be entered into no later that 21 days before the wedding day as one party could be left wide open to the allegation of duress and that the other was forced to sign the agreement shortly before the big day.
Pre-nuptial Agreements remain unenforceable under the English legal system (unlike in Scotland, America and other European Countries) and despite pressure from the Law Society upon the Government to legislate in this area, this has so far been resisted. Their use is however encouraged.
So if not legally binding, why have one? The Courts are not ignoring the existence of the agreements and they are increasingly considered a relevant factor. If the agreement closely reflects the position of the marriage at the time of divorce, the more relevant it may be. It is better to have one than not at all. It is vital to have one when the assets of the marriage are of good size and there is an international element where one party seeks to rely on the agreement in another jurisdiction.
A good pre-nuptial agreement must consider the future and be more generous as the length of the marriage increases. It certainly should be revisited on a regular basis to allow both parties to take account of differing circumstances and for the agreement to reflect them. As the agreement is a contract, it needs to conform with general contract principles. It will be of little use if its contents are uncertain and ambiguous or if it is later revealed that the parties did not disclose to each other all the relevant financial details at the time of the agreement. In the event of a marriage breakdown and a pre-nuptial agreement having been signed, the Court will look closely at all of these issues and particularly, whether the parties had independent legal advice.
*Carol Barraclough is a lawyer at Matthew Arnold & Baldwin www.mablaw.co.uk