Pre-nups ‘on the up’

Lawpack on May 12, 2020

Prenuptial agreements have attracted considerable media attention over the years, particularly during high-profile celebrity divorces, such as that of Katie Price and Peter Andre.

Reports about their financial arrangements highlighted a question that many couples face before getting married: how can they protect their individual assets and agree in advance how their finances should be dealt with if their marriage ends?

A prenuptial agreement, commonly known as a prenup, allows a couple to record their intentions regarding financial matters in the event of separation or divorce. However, in England and Wales, a prenup is not automatically legally binding on a court, and its terms cannot guarantee a particular financial outcome.

Why are more couples considering prenuptial agreements?

Prenuptial agreements can be particularly attractive to couples who bring different levels of wealth into a marriage, own property, have business interests or wish to protect assets acquired before the relationship.

Economic uncertainty and concerns about financial security may also influence couples to consider making an agreement before they marry.

A prenup can help establish expectations about how assets and liabilities should be treated if the relationship ends. However, it is important to recognise that an agreement cannot necessarily prevent a court from making a different financial order if fairness requires it.

Are prenuptial agreements legally binding?

In England and Wales, prenuptial agreements are not automatically binding, but the courts may give them substantial weight.

Following the Supreme Court’s decision in Radmacher v Granatino in 2010, a court will generally give effect to a nuptial agreement freely entered into by both parties, with a full appreciation of its implications, unless it would be unfair to hold them to it.

The circumstances in which the agreement was made matter. Full financial disclosure, independent legal advice and sufficient time to consider the terms can all help demonstrate that both parties understood what they were agreeing to.

A prenup should not be viewed as a guarantee that neither party will be entitled to financial provision following divorce. The court retains its powers to consider the circumstances, including each party’s needs and any relevant children’s needs.

Cohabitation agreements: a different set of legal issues

Couples who live together without marrying or entering into a civil partnership face different legal considerations.

In England and Wales, there is no legal status of ‘common-law marriage’. Living together for many years does not automatically give an unmarried couple the same financial rights as married couples or civil partners.

Cohabiting couples should consider the legal arrangements governing their property, finances and inheritance. Depending on their circumstances, a cohabitation agreement may help record their intentions regarding household expenses, ownership interests and what should happen if they separate.

If they own property together, they should also consider how the property is legally and beneficially owned. A declaration of trust may be appropriate where they wish to document their respective shares.

Making Wills is also important because unmarried partners do not automatically inherit from one another under the intestacy rules in England and Wales. The position may differ where assets are jointly owned or other legal rights apply.

Can a DIY agreement provide protection?

A template can provide a useful starting point for couples who want to organise their financial arrangements. However, a DIY prenuptial or cohabitation agreement does not guarantee legal enforceability.

For a prenuptial agreement, both parties should ideally obtain independent legal advice, disclose their finances fully and allow sufficient time to consider the terms before the wedding.

For cohabiting couples, a suitable agreement should reflect their actual ownership arrangements and intentions. Legal advice is particularly important where property, substantial assets or complex financial circumstances are involved.

Although preparing information in advance may help manage legal costs, couples should not assume that an agreement will eliminate the need for legal advice or future court proceedings.

Can a prenuptial agreement make divorce easier?

A carefully prepared prenup may help narrow the financial issues that need to be resolved if a marriage ends. It can provide evidence of the parties’ intentions and potentially reduce disputes about the treatment of particular assets.

However, it does not automatically make a divorce straightforward or remove the need to resolve outstanding financial matters. A court may still need to consider whether the agreement should be upheld in the circumstances.

The same principle applies to cohabitation agreements: planning ahead may reduce uncertainty, but it cannot guarantee an amicable separation.

Planning ahead

Whether you are planning to marry or deciding to live together, discussing financial arrangements before making a long-term commitment can help both partners understand their position.

A prenuptial agreement may be worth considering if you are getting married and want to record your intentions about financial matters. If you are living together without marrying, a cohabitation agreement, appropriate property ownership arrangements and Wills may provide more relevant protection.

The best approach depends on your circumstances. Taking advice before entering into an agreement can help ensure that it reflects your intentions, addresses the right legal issues and gives both parties a clear understanding of their rights and responsibilities.

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