PRENUPITAL & POST-NUPITAL AGREEMENTS

Clients often ask how do the courts work out who gets what at the end of a marriage or civil partnership. We hope that this information sheet might go some way to answering that question.

Prenuptial & Post-Nuptial agreements were previously void in the English Legal System despite being binding in some other countries. However, recently there have been a number of high-profile cases where the outcome of applications for financial provision, known as “ancillary relief” have been heavily influenced by a pre-nuptial or a post-nuptial agreement.

These agreements are now being used more frequently in England and Wales by couples whose assets exceed their needs.

On divorce or dissolution of a civil partnership, the courts have discretion to redistribute the parties’ property and income, they take into consideration the needs (for instance if one is disabled or has special needs) and responsibilities of the parties, their income, earning capacity (for instance one might not be able to get a good job because they have taken years off work caring for the children, they might not be able to recover economically and the court might award periodic payments to that person that reflect this) and all their resources, and the contributions they made to the relationship. Paramount importance is to be given to the needs of the couple’s minor children and that includes child care and the needs of the primary carer and to ensure that they have a home and an income. In this regard the court might award a lump sum for equipping the home for the children and carer and make the matrimonial home available to them until the children leave full time education or reach the age of 19 years, whichever is the sooner. The determined budget takes into account maintenance of the home and its contents, school fees, holidays, travel expenses, entertainment, Christmas and birthday presents. If after that there is still money left, then court will look at the needs of both adults. When the children (if any) have flown the nest the family home might then be divided and the court in so doing will be mindful of the ability of each party to obtain a mortgage. Those that have given up work to look after the children might receive a larger portion of the equity in the matrimonial home, this might depend on the mortgage capacity of each party. The court also has power to make a pension sharing order so that the parties share the pension which was intended as a joint provision in old age.

The court often has to decide how the financial recourses can now meet the needs of two households when finances previously served one.

There are those couples whose assets are more than required to meet the needs of two households and the courts tend to share the surplus assets once the parties needs have been met, this is not necessarily a 50/50 division. There is no reasonable requirement ceiling when it comes to the assets being divided, particularly if the couple were business partners. The court will look at what is fair so as not to prejudice or advantage either party but equality can be departed from if, there is good reason for doing so. For instance if the couples assets are generated from one parties special talent, that party should be entitled to more than half on the basis of an outstanding contribution. Sharing is less likely in short marriages. Further, assets acquired prior to the marriage, inherited property are classed as non-matrimonial property and may but not necessarily, be exempt from sharing. In such cases the court takes into consideration the needs of the parties, compensation and sharing.

The courts stance at present seems to be that the couple cannot oust the jurisdiction of the court, therefore, when a court grants ancillary relief it is not obliged to give effect to any pre-nuptial or post-nuptial agreement, however, it will, be one of the matters that the court takes into consideration. The court will give appropriate weight to the agreement if each party entered into the agreement with a full appreciation of its implications, unless in the circumstances, it would not be fair to hold the parties to their agreement.

Unfairness is assessed amongst other things on the nature of the property and characteristics of the parties and ascertaining whether the agreement was entered into freely without pressure, before or after the celebration of marriage or civil partnership.

There are those who are reluctant to marry or become civil partners in case the union does not work out, the deterrent being the risk of ancillary relief proceedings. Such people include those who have been a party to ancillary relief proceedings when a previous relationship did not work out, those with inherited wealth and those who own family businesses or those where one or both parties come from a county where pre nuptial agreements are the norm. There are cases where one parties’ parents have contributed to the purchase of the couple’s house and want to ring-fence their contribution. In all of these circumstances it would be advisable to enter into a pre-nuptial agreement.

In the event of ancillary proceedings, the prenup would seek to exclude non-matrimonial property from the shared pool of assets by asserting a form of ‘firewall’.

In view of the above, it is prudent for couples to have a pre-nuptial agreement which makes it clear in advance which property is non-matrimonial and not to be shared on divorce or dissolution of civil partnership.

Further, a Pre or Post Nuptial agreement could have a positive financial impact on relationship breakdowns with regard to minimising litigation costs.