Three warnings about pre-nuptial agreements

June 3, 2014

– and why you need to make sure both you and your partner get the right advice

This excellent article (click here) about pre-nuptial agreements raises several warnings not only for the lawyer audience it was written for but also for those who look to rely upon pre-nuptial agreements if their marriages end.

The article presents a neat review of the evolution of pre-nuptial agreements from the main case they featured in, namely Radmacher v Granatino.  That case set out some early expectations on what a court would want to see if they were to be persuaded to follow what was contained in any pre-nuptial agreement.  Particular attention is drawn to the requirement that the agreement must be shown to have been  “Freely entered into with a full appreciation of its implications.”

The article then goes on to look at how the role of the pre-nuptial agreement is evolving in the eyes of the court;

The recent Law Commission Report, Matrimonial Property Needs and Agreements recommended that independent legal advice for both sides should be compulsory in order for a pre-nuptial agreement to be binding.  The article also refers to the case of Kremen v Agrest which stated that

It seems to me that it will only be in an unusual case where it can be said that absent independent legal advice and full disclosure, a party can be taken to have freely entered into a marital agreement with a full appreciation of its implications.”

These points stir up the three warnings we refer to in our title;

  1. Ideally you both need to have taken independent legal advice

If you are preparing a pre-nuptial agreement then you want it to be binding when you come to rely upon it, possibly many years later.  If either of you do not have independent legal advice then the agreement may be set aside by a divorce court and an alternative settlement imposed in its place. 

You should ensure that both of you, therefore, take legal advice. 

In the current climate of self-representation where many people look to sort out their own legal concerns without instructing lawyers this could leave you in a precarious position where you do not have the protection upon divorce that you thought you had.

  1. The legal advice you both take needs to be competent

The Law Commission Report sets out recommendations as to what the legal advice taken should cover;

7.59 In Chapter 6 we set out the points that such legal advice must cover.  We also

think that advice might usefully cover:

(1) The advantages and disadvantages, at the time that the advice is provided, to that party of making the agreement, including what he or she might receive on a divorce without a qualifying nuptial agreement.

(2) Provision for the party’s needs, out of which the parties cannot contract by using a qualifying nuptial agreement (including any uncertainty as to the form, level and duration of such provision).

(3) The need for disclosure from the other party.

(4) The need, if any, to make provision in the agreement about the effect of sale and replacement of any assets specifically mentioned in it, and about the consequences of one party investing in or contributing to property during the marriage or civil partnership.

(5) That the agreement will hold regardless of changes over time, such as

the birth of children.

(6) If the couple, or one of them, is a foreign national or is domiciled overseas, or has property outside England and Wales, whether it would be advisable to obtain advice from a foreign lawyer with appropriate expertise. If such foreign advice has been obtained, advice should be given about its effect on, and interrelationship with, the English advice.

This is a substantial list even without the full consideration of the whole of chapter 6 referred to at the start of the above excerpt.    

What happens if your partner takes legal advice which is later found to be lacking? 

Will he or she be deemed by the family courts, upon a later divorce, to have not entered into the pre-nuptial agreement “With a full appreciation of its implications”?  In this situation the agreement could be set aside and you could face a court led reassessment of how your finances are to be distributed even though your own legal advice was sound.

You should ensure therefore that both of you take legal advice from specialist family lawyers who have experience in dealing with pre-nuptial agreements.  Your respective lawyers will ensure that they draft the pre-nuptial agreements properly and, in doing so, record what considerations were taken into account when giving advice. 

  1. The potential cost of legal advice on prenuptial agreements

The above points should make it clear that getting independent legal advice on a pre-nuptial agreement is not a mere box-ticking exercise. 

There has to be a risk that people will opt for the cheapest and quickest legal advice option.  That could end up being counterproductive if your partner successfully argues that the legal advice taken was inadequate and left him or her without a full appreciation of the implications.

Be careful to resist this cost cutting approach therefore. 

Ensure that legal advice is full and proper, provided by specialist family lawyers with experience of pre-nuptial agreements and the rapidly changing rules surrounding them.  You might want to ask your lawyer if they have considered Radmacher v Granatino – they most certainly should have done.  Also ask them, though, if they have taken into account the Law Commission Report Matrimonial Property Needs and Agreements.  Although this is not yet law it does reflect the most current thinking about safeguards surrounding pre-nuptial agreements. 

If the advice that both you and your partner receives complies with this state of the art thinking in this area then the agreement that you hope to be binding is more likely to be endorsed years later if you ever need to rely on it.

Let us help you

Family Law in Partnership are a leading firm of divorce lawyers, family mediators and counsellors in London.  If you are thinking about having a pre-nuptial agreement or if you are worried about one you already have then contact us now with any questions you might have.  You can email us, confidentially, at hello@FLiP.co.uk or telephone us and ask to speak to one of our solicitors on 020 7420 5000.