Stuart Barton (Head of Department) and Paula Fraser
It has become increasingly common for parties entering into a marriage to consider a pre-nuptial agreement. This is an agreement between the parties setting out how their financial assets would be divided in the event that the marriage should subsequently break down. If you are contemplating a pre-nuptial agreement, or are being asked to enter into one, there are lots of things you need to know over their position in English law.
For parties who have already separated or are contemplating separation, there are often good reasons not to start divorce proceedings immediately. It is often the case that the main priority for the parties is to achieve a financial settlement, rather than actually ending the marriage. Separation agreements are an effective way of meeting this objective. Again though, if the agreement is to be seen as enforceable, it must meet the necessary formalities. They are also subject to practical and legal limitations.
Unlike in other countries (notably USA), pre-nuptial agreements are not automatically legally binding in England and Wales. This often takes people by surprise and begs the question of why anybody should enter into one in the first place. However, the Supreme Court in England and Wales has recently determined that a pre-nuptial agreement should be binding upon the parties if certain formalities are met. These formalities are subject to some degree of interpretation. What are they and how do they operate?
Full and frank disclosure
A pivotal part of any pre-nuptial agreement is that both parties provide full and frank disclosure of their respective income and assets prior to the marriage. If this requirement is not met, it cannot be said that both parties had a full understanding as to the financial resources available to one another. The likely consequence of inadequate or incomplete disclosure is that the agreement would not be binding on the parties.
Each party should freely enter into the agreement. By this, we mean that the parties are signing it without fear, duress or any other form of pressure. A party who is given the agreement the night before the wedding and asked to sign it, failing which ‘the marriage is off’ will clearly be under unfair emotional pressure. If you are contemplating a pre-nuptial agreement, the planning and preparation of this agreement should start several months before the date of the wedding.
What does it mean?
Both parties should have a full appreciation for the implications of the agreement. By this, we mean that each party should ideally have independent legal advice upon the terms of the agreement and what ultimately it means for them. There is no requirement that each party must have instructed a solicitor of their own but it is important that each party at least had the opportunity to seek independent legal advice.
The wider circumstances should not make it unfair for the parties to be held to their agreement. This is harder to define. Even if the other formalities are met, it is still possible that a pre-nuptial agreement would not be upheld. Events such as the birth of a child or children, major illness or an obvious disparity in the overall financial position of the parties after a lengthy marriage may lead to the agreement not being upheld. The best way to guard against this is for a ‘post-nuptial agreement’ to be entered into after the marriage or after any of the above events. It is also recommended that the parties review their circumstances at regular intervals such as every 5 years after the marriage.
In English law, an agreement entered into by the parties after they have married is treated differently to one entered into before the marriage. Such agreements are known by a variety of terms. They can be called a ‘Post-Nuptial Agreement,’ a ‘Separation Agreement’ or a ‘Deed of Separation.’ However they are called, the court can recognise such an agreement as legally binding upon the parties. Once again though, the necessary formalities should be observed over how that agreement is prepared and ultimately signed by the parties.
Separation agreements are essentially a contract between the parties. It is common that such an agreement will cover both the division of financial assets and how/when the parties plan to start divorce proceedings. More often than not, the parties agree that a divorce will be put on hold until they have been separated for 2 years. This subsequently allows either one of them to start divorce proceedings on the ‘non-fault’ fact of 2 years’ separation with consent of the other party.
Such agreements do have limitations. If the parties intend for pension assets to be divided, they will have to wait until divorce proceedings have been resolved and ask the court to make appropriate orders at that stage. Another problem may be a refusal on the part of one of the parties to honour the terms of the agreement. It is also not unheard of for one party to suggest that the agreement was deficient or unfair and suggest that additional provision should be made in their favour. If this should occur, the court can express an opinion upon the agreement and make appropriate directions.
Should I enter into an agreement?
Remember that nobody can be forced to enter into any agreement. If you are being pressured, coerced or forced to enter into a Pre-nuptial or Separation Agreement it is more than likely that the terms of that agreement may be unfair towards you. You should always seek independent legal advice over the terms of the Agreement. After all, the chances are that the other party has done so.