Pre-nups: what are they and are they legally enforceable?
What are pre-nups and what do they cover?
Simply put, a pre-nup is intended to set out the couple’s agreed decision about what should happen to their assets if they get divorced. They can be as in-depth as the couple requires. They can cover everything down to the last detail, including who will keep specific items of furniture and how much child maintenance should be paid (even if the couple do not yet have children).
For other couples, an agreement might simply record that one party’s third share of property inherited from their late grandmother is to be treated separately in the event of a divorce, but the split of all other assets will be decided upon if and when needed.
A couple may understandably not always be in a position to predict what they will have at the point of a hypothetical divorce. In those cases, pre-nups often record principles. For example, a couple may choose to agree that all property bought in joint names during the marriage will be shared equally. Review clauses can also be used so the agreement is reconsidered at the date of significant events, such as at the birth of a child.
It is also crucial to remember that different countries take different approaches to pre-nups and it should not be assumed that an English court will uphold a German agreement or vice versa. A couple from different countries or with assets held overseas may need a pre-nuptial agreement in more than one jurisdiction and in more than one language.
Who tends to use them?
Pre-nuptial agreements are typically associated with celebrities and the super wealthy, but the reality is quite different. They are growing in popularity with entrepreneurs, people with shares in a limited company, or those with a stake in a family business.
Equally, people who have received an inheritance (be it large or small) may feel that this money should be considered separately to matrimonial assets. Occasionally it is the protection of future shareholdings or a future windfall that is the motivating factor, or ensuring that children from a first marriage do not lose out on their inheritance as a result of a divorce.
Are they growing in popularity?
As entering into a pre-nuptial agreement is a highly confidential and personal decision, it is impossible to accurately gauge the volume of agreements being signed in the UK. They will often contain strict confidentiality clauses preventing the contents of the agreement being disclosed without the other person’s permission.
Anecdotally, however, family lawyers across England and Wales have reported an increase in the number of people seeking advice and entering into pre-nups since the Supreme Court heard the case of Radmacher v Granatino in 2010, which found that pre-nuptial agreements should be given decisive weight in divorce proceedings.
How much does it cost to set up a pre-nup?
The cost of a pre-nuptial agreement will vary, depending on how complicated the couple’s situation is, their assets, and what they agree. It is also essential both parties take separate legal advice, so there will also be two sets of lawyers’ fees.
How should a couple discuss a pre-nup?
Often questions arise during discussions that the couple may not have even considered. It is recommended they are open and honest with each other about the outcomes they fear and what they can agree is fair. A pre-nuptial agreement can only be entered into with both parties’ agreement so it is important they are both fully involved in the discussions rather than leaving it entirely to lawyers.
Are pre-nups legally enforceable?
They are not 100% binding as this would require a change in the law/statute, but they are very likely to be upheld if the agreement meets the criteria that it was entered into freely, with both parties fully appreciating the implications of the agreement, and it is fair to hold the parties to the agreement in the prevailing circumstances at the point of the divorce.
What’s the difference between a pre-nup and a declaration of trust?
Declarations of trust are usually associated with property purchases made before marriage. They typically set out and define each party’s contribution to the price of a house, particularly when one contributes more towards the deposit, and how the proceeds of any sale would be divided between them.
In most cases, however, the protection offered by a declaration of trust is lost if the parties get married and the court has power to decide what should happen to the equity in the property. A pre-nuptial agreement could be designed to set out the same criteria and continue this protection.
Lottie Tyler is associate in the family law team at national law firm Weightmans