Continuing our series of articles for Valentine’s week, we look at the importance for couples heading to the altar / Register Office / or beach of not just Champagne to signify love and vitality (a tradition that started in the Royal Courts of Europe), but also Pre-Nuptial Agreements.
It is increasingly common for people to consider entering into a Pre-Nuptial Agreement prior to getting married. In many other jurisdictions they are commonplace and, indeed, some jurisdictions require a couple to select a marital regime regulating how their assets will be dealt with before allowing them to marry.
In England and Wales, Pre-Nuptial Agreements are not recognised by statute, but by case law following the Supreme Court case in 2010 of Radmacher, which held that:
“the Court should give effect to a prenuptial 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”.
As with any contract, it is important that the formalities are followed in order to make the Agreement binding. This means that the Agreement must not only be fair in how it divides a Party’s assets in the event of a Divorce, but must also be fairly negotiated and not the subject of somebody being forced into the Agreement whether overtly, or by implication, for example, by leaving it to the week before the wedding to raise the topic. That in itself would raise concerns.
These days with more second marriages, blended families, children and stepchildren, the need for careful thought to be given to what should happen in the event of a Divorce cannot be overestimated.
A Pre-Nuptial Agreement allows the couple to ring-fence certain assets, particularly those that may have been acquired before the couple even met or, for example, if there has been a significant amount of inherited property which needs to remain in the family. Interest in Trusts can also be protected in this way and we are seeing more and more Trustees requiring beneficiaries to consider a Pre-Nuptial Agreement before getting married in order to safeguard the Trust assets.
Of course, the provision made in the Agreement must be fair. It would not be possible to leave somebody without any assets of their own with no share of the new family wealth.
Certain other factors come into play when dealing with a Pre-Nuptial Agreement, such as whether the couple are likely to have children of their own and the way in which those children are to be provided for.
A Pre-Nuptial Agreement must be made with the benefit of financial disclosure. It is important that anybody who is considering giving up rights by entering into a Pre-Nuptial Agreement is aware of the nature and value of the entitlement they are being asked to surrender.
Drafting and, even more so, negotiating a Pre-Nuptial Agreement on behalf of a Party requires considerable sensitivity. We always recommend that couples consider having the discussion about a Pre-Nuptial Agreement and creating and signing it long before the wedding ceremony itself.
There are bound to be some areas of tension, and with skilful advisors the couple can be helped to progress to a final Agreement many weeks prior to the wedding ceremony so that as the ceremony approaches attention can be spent on the important issues of seating plans, floral decorations and, of course, the choice of Champagne.
At the same time as making the Pre-Nuptial Agreement, it is often recommended that the Parties enter into new Wills. Many people are not aware that the act of getting married renders any previous Will ineffective. Without a new Will the Parties will have to fall back on the Intestacy Rules, which can often have adverse and unintended consequences. Moreover, it is very common for a Pre-Nuptial Agreement to contain a requirement for both Parties that they will make suitable provision for the other in their Wills along the lines of the provision in the Pre-Nuptial Agreement itself.
Related article: Valentine’s Week: Gonna make you an offer you can’t refuse…