While prenuptial agreements have long been an option explored by some, the Law Commission has recommended that they are introduced as a legal necessity in England & Wales.
The Commission, a statutory independent body that advises on law reform, has proposed that prenuptials should become legally binding in divorce settlements subject to stringent qualifications.
The current legal status of prenups
Prenuptial agreements are currently recognised by the English & Welsh courts as enforceable under divorce law.
The principle was established by a case in 2010, which involved German heiress Katrin Radmacher. She wanted to protect her £106m fortune in the event of her marriage breaking up.
After the couple’s split the court ruled in her favour and took into account the prenup that her and her investment banker husband signed before they got married.
The case set a legal precedent, with judges now having to take prenuptial agreements into account in divorce cases.
The Law Commission’s new proposals
1. Qualifying nuptial agreements
The Commission’s new report, entitled Matrimonial Property, Needs and Agreements, includes a draft bill which calls for the introduction of ‘qualifying nuptial agreements’.
These would allow both married couples and civil partners to draw up a precise agreement of how they would split any property or finances they have to their names in the event of splitting up.
However, a qualifying nuptial agreement would only be legally binding once the needs of any children involved in the relationship have been met.
What’s more, the prenup would only be binding if both adults had revealed all the relevant information and received legal advice.
Professor Elizabeth Cooke, the Law Commissioner for property, family and trust law, said: “We believe that married couples and civil partners should have the power to decide their own financial arrangements, but should not be able to contract out of their responsibilities for each other’s financial needs, or for their children.
“The measures we are recommending would help couples understand and meet their financial responsibilities and, where appropriate, achieve financial independence.”
“Qualifying nuptial agreements would give couples autonomy and control, and make the financial outcome of separation more predictable,” Professor Cooke added.
2. Standard formulas
Another of the Law Commission’s ideas is for the introduction of standard formulas to help resolve disputes over financial settlements and publication of official guidance on what constitutes legitimate “financial needs”..
The formula would work out precise financial needs and is based on a rule which already exists in Canada.
According to the organisation, there is already evidence in place that there are inconsistencies surrounding the way courts deal with break-ups, and in particular the financial needs of those involved.
Family lawyers generally have a good understanding of the law, but there is very little clarity for the general public regarding how they will be treated in these circumstances and what financial consequences they are likely to face upon separating from a partner.
Professor Cooke went on to promise that the Commission has already considered and included safeguards within its proposal to ensure that nobody can use qualifying prenuptial agreements to plead hardship or escape responsibility for any children.
The Law Commission is now awaiting the government’s response to its recommendations and suggestions.
Published on: March 31, 2014