The Existence of Prenuptial Agreements

The existence of Prenuptial Agreements (pre nup) has been given a further boost by a recent Family Court decision at the end of 2016. Whilst pre nups are not legally binding, the Family Courts in England are increasingly willing to uphold pre nups as long as they were entered into freely with full understanding of their implications by both parties. Comprehensive financial disclosure is of paramount importance together with careful drafting and detailed legal advice to be provided to both parties.

After a marriage the respective parties’ assets become ‘matrimonial assets’ and, unless specifically protected can be considered for division between the parties within divorce proceedings. The principal goal of a pre nup is to limit the potential claims on the assets of one of the parties to the marriage.

Many commentators believe that claims in divorce represent a more enduring threat to wealth than even taxation. All of the assets of the parties to the divorce are subject to the jurisdiction of the Family Court including trusts, pensions, business assets and investments. Where pre nups have been appropriately negotiated following the proper steps it is becoming ever more likely that the Family Court will uphold their content and intentions. As such pre nups and Post nuptial Agreements are growing remarkably in popularity as a useful method to promote wealth planning. In the case of H&H (2016) the parties parted ways only 12 weeks after marrying. The terms the pre nup stated that they were each to retain what they owned prior to the marriage and neither was to have a claim against the other. The wife had few assets and the husband was relatively wealthy.

Notwithstanding the serious allegations made by the wife against the husband the court found that the wife should be bound by the terms of the pre nup, and her argument that she suffered from medical issues and lacked earning capacity were not accepted.

In the absence of the pre nup the outcome of the case would probably have been rather different and more favourable to the wife.

Currently a prenuptial agreement does not have the same authority as a Court order and will not ‘automatically’ be upheld or enforced by a Court in England in the event of a divorce.

The Family Court has broad and sometimes unpredictable discretion when making judgments about financial provision on divorce but there is a growing body of case law that shows that properly implemented Prenuptial Agreements are frequently upheld by the Family Court.