Last month I was invited to talk to a national law firm’s Wealth Preservation team about pre-nups. To talk about pre-nups, you conversely need to start by talking about what happens if there is no pre-nup. What is the default position?
The Law Commission started looking at “Marital Property Agreements” in 2009, and decided they needed to expand their brief before they could report. Before they look at whether pre-nups should be binding, they want to consider the concept of “needs” in financial provision. This “needs” concept is one which goes to the very heart of the work that I do. In financial negotiations, both parties will usually prepare a document setting out their income and capital needs, establishing how much money they need each month, and how much of a lump sum they require. This should reflect reality – if you are a Sainsbury household during marriage, you will not be able to insist on a weekly Fortnum and Mason shop going forward. Both parties will want those needs met from the pot of money available, and if there is a surplus to be divided afterwards, that simply makes the meeting of needs easier.
Should a couple should be able to contract out of meeting each other’s financial needs on divorce? Whilst the Law Commission are tackling this question, on the ground many couples are now choosing to enter pre-nuptial agreements. The courts say that you can rely on a pre-nup if it is freely entered into by each party with a full appreciation of its implications, unless to do so would be unfair.
The courts have also said that the question of whether the circumstances of the signing was fair will often be subsumed in the question of whether the document is fair at the point of divorce. Is your pre-nup going to be considered fair, if you were to divorce? Life events change circumstances, and asset pots change too, In my opinion, the pre-nup is a document that needs to evolve over time as life events occur, to keep fairness within reach. This can be done using a “post-nuptial agreement”, a contract during marriage.
A regular review of the pre-nup may avoid tricky issues arising on divorce, and as more couples enter pre-nups, I hope that they also consider how they can keep those agreements fair, as their lives evolve together.Get Expert Advice You can contact us for confidential family law advice. We offer free, no obligation, telephone consultations for qualifying individuals. If you would like to book an initial phone consultation at no cost, please contact us today. We will remain fully operational for the duration of the Coronavirus COVID-19 Crisis. Copyright 2013-2020 Rainscourt Law LLP. All rights reserved.