Just in Case: The Rise of Pre-Nuptial and Post-Nuptial Agreements
Published: 27 February 2016
It may not come as a surprise to hear that pre-nuptial agreements are becoming more commonplace. Courts have typically supported the right of couples to enter into a contract to agree how assets and income should be divided in the event of divorce.
However, what may come as more of a surprise is the volume of new enquiries to discuss the possibility of negotiating and signing a post-nuptial agreement, where there is no pre-nuptial agreement already in place. Generally speaking, post-nuptial agreements had previously been used to ‘affirm’ the terms of the original pre-nuptial agreement – in the hope the Court would give the agreement more weight.
A recent survey reported in the Solicitors Journal found around 10 per cent of people surveyed regretted not signing a pre-nuptial agreement. It was also reported the biggest reason for not having a ‘nuptial agreement’ was that the other person had refused to enter into one.
In February 2014 the Law Commission recommended, providing certain safeguards had been met, pre-nuptial agreements should be legally binding. For the time being, pre-nuptial and post-nuptial agreements are persuasive but not immune from being legally challenged. Accordingly, the Court can exercise its discretion to vary an agreement in order to achieve fairness.
Even if the terms of a pre- or post-nuptial agreement are departed from, they are often helpful in reducing the issues in dispute and will generally be of some assistance to the Court. As a consequence, the costs of negotiating and drafting a pre-nuptial agreement when the parties are on good terms and communicating well are likely to be far less than when a marriage breaks down and communication is strained.
If you are considering a pre-nuptial agreement, it is essential that you allow for plenty of time to negotiate and sign the agreement – the longer the better, but ideally the agreement should be finalised and signed at least 6 weeks before the wedding day. This means early consideration and discussions are vitally important because each party needs time to take independent legal advice and digest the advice given. There also needs to be a summary of the assets, liabilities and income so that each party can both make an informed decision. All of these matters tend to take up valuable time and weeks often slip by very quickly, particularly in complex cases.
We also advocate having an open and clear dialogue with your future spouse when it comes to nuptial agreements. This approach generally allows for common ground to be agreed more quickly and the more difficult issues can be discussed in a constructive and positive manner. In order to facilitate discussions, a draft agreement may be prepared using general heads of agreement which are then fine-tuned.
One of the features of either a post-nuptial or pre-nuptial agreement is the ability to address a wide range of matters, from the choice of hospital or consultant for child birth, to a child’s education or matters that deal with the parties' relationship such as the number of ‘date nights’ per month for example.
It is often important to involve one’s financial advisers in the process of drafting a pre- or post-nuptial agreement as sometimes there can be tax consequences to consider when looking at the terms of the agreement or how assets may be held or shared in the future. Finally, an agreement is drafted at a certain ‘point in time’ in the couple’s relationship with their existing financial position. However life changes and a well-drafted agreement need to allow for review periods and possibly ‘step up’ provisions to allow for greater financial provision when marriages reach certain milestones – such as 5 or 10 years' duration. A review can also be triggered on certain events such as the birth of a child, loss of employment or diagnosis of a health issue. Review periods can sometimes create tensions because one party may want the agreement to fall away if new or existing terms are not agreed, whilst the other party may want the existing agreement to stand.
We recommend that anyone either considering marriage or who is already married should contemplate a ‘nuptial agreement’. Whilst it is hoped the agreement will never be needed, it can be looked upon in a similar vein to an insurance policy - by helping to resolve financial matters more quickly and cheaply in the event of a divorce. With divorce rates at 42 per cent, can you afford to take the risk?
The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.