Pre-nuptial agreements are becoming more common. They are not just for the rich or celebrity couples and if you are contemplating getting married or entering into a civil partnership you should consider whether or not you need one. Gemma Purt, Partner in Family Law, explains what should be included.
What is a Prenuptial Agreement?
A Prenuptial Agreement is an agreement between two parties prior to their marriage or civil partnership which sets out how they wish to divide their finances in the event of separation.
Whilst not legally binding the Court are upholding more Prenuptial Agreements if they have fulfilled a number of criteria at the time they were entered into.
In order to have your Prenuptial Agreement upheld it is vital that your Prenuptial Agreement complies with the following:-
- It is freely entered into by both parties with no evidence of mistake, duress, undue influence or misrepresentation. There should be sufficient time for the parties to consider the document, obtain independent legal advice and sign it. You should not therefore sign the Agreement right before the wedding/ceremony.
- Both parties should be aware of each other’s financial position and there should be disclosure of the parties’ finances.
- Both parties should obtain independent legal advice.
- The Agreement must not prejudice the financial needs of any children.
- The Agreement must provide for both parties financial needs to be met.
- The Agreement must be validly executed as a Deed.
The Agreement should set out how assets will be divided in the event of a separation.
What should the Agreement include?
When thinking about such an Agreement and what clauses you would want you should give consideration to the assets you have and what you would wish to happen to them in the event the marriage ended. Assets can be matrimonial or non-matrimonial and you may want the Agreement to effectively “ring-fence” specific assets from each other. These could be inherited assets, interests in a family business or property acquired prior to the marriage. If the Prenuptial Agreement ring-fences assets then the Court is less likely to award a share of that property to the other if the marriage breaks down. You might also wish to ensure that any children from a previous relationship are provided for.
What clauses parties seek to include in a Prenuptial Agreement will depend on the circumstances of their situation and will be relevant to their particular case.
Lifestyle and social media clauses are less common in England although reportedly more widely used in the United States. It was reported, although not confirmed whether it was true, that in the Prenuptial Agreement Jessica Biel and Justin Timberlake had prepared included an infidelity clause which grants Jessica half a million dollars if Justin is unfaithful to her.
Some of the more typical clauses you may want to give consideration to including are as follows:-
- Spousal maintenance
Although there has been some shift in society it has traditionally been the case and is still often the case that women’s careers take more of a back step when children are born. This leaves them financially disadvantaged if the relationship breaks down. They are likely to earn less and therefore have less money to meet their outgoings. This also impacts on their mortgage capacity for the purchasing of a new property and they may have built up a smaller pension pot to meet their income needs on retirement.
It is therefore important that if you are the party that has been financially disadvantaged by the relationship that you include a clause in your Prenuptial Agreement for spousal maintenance.
If you have children then on separation the party with whom the children do not live with is obliged to pay child maintenance for the children. This, in most cases, is dealt with by the Child Maintenance Service and is worked out using a specific formula. Spousal maintenance is in addition to Child Maintenance and is to top up the financially disadvantaged party’s income so that financially they can meet their outgoings.
The Court want the parties to move towards being financially independent as soon as possible but spousal maintenance is something that consideration should be given to and the Prenuptial Agreement can include financial provision for the financially weaker party.
- Career disadvantage
You can also include a clause in your Prenuptial Agreement for compensation for career disadvantage. It is often difficult to persuade a Court within financial proceedings that they should attach a monetary value and therefore financial compensation for an element of loss of career but provision for this in a Prenuptial Agreement is likely to be upheld by the Court and is something that consideration should be given to if a party’s career has been disadvantaged by the marriage.
- Business protection
It is important to protect any businesses to prevent disruption in the event that the marriage breaks down. This will not only protect the business but also protect any business partners.
- Pension provision
The Court is likely to think the parties should leave the marriage with the same amount of pension to draw down at retirement. The Court have a wide discretion when dealing with pensions and your Prenuptial Agreement can include a clause as to what the parties would wish to happen in relation to pensions. This may be particularly important if there is a large pension pot that has accrued by one or both before the parties married.
- Review clauses
You would need to include a review clause. A review clause is really important and the Court will look at if the Agreement has such a clause and if the Agreement has been reviewed in line with this clause should the marriage end and a party wish to rely on the Prenuptial Agreement.
As circumstances change it is important the Agreement is reviewed at regular intervals to ensure that the Agreement still meets the parties’ needs. It would be usual to include a clause to review the Agreement say every 5 years with it also being reviewed on any specific life changing events such as the birth of a child/redundancy.
The law surrounding Prenuptial Agreements is complex and it is important that you obtain independent legal advice if you are contemplating entering into such an Agreement.
We have specialised family solicitors in each of our offices who are all members of Resolution. Our family team have been recognised by the Legal 500 as specialists in their field. Please contact us if you wish to obtain further advice regarding Prenuptial Agreements or you have any other family issues you want advice on.