When Prenups Will Hold Water Under English Law

Richard Collins

Charles Russell

13 February 2013

Richard Collins, a family lawyer at Charles Russell, discusses how to maximise one spouse’s chances of having an effective prenuptial agreement.

Last month, model and businesswoman Katie Price married for the third time. She has reportedly set up what she described as a "watertight" prenuptial agreement for her new husband Kieran Hayler to sign. Many people argue that pre-nups are unromantic but in England and Wales they act as a form of wealth protection. In 2012, Price's net worth was estimated at £45 million (around $70 million) so it is no surprise that she would want to protect her fortune.

There are no official statistics on the use of prenuptial agreements in England and Wales because they are private agreements between the couple and are not recorded on marriage certificates or any other official document. However, it is commonly believed amongst specialist family lawyers that over the past few years prenuptial agreements (and post-nuptial agreements made during the marriage) are becoming ever more popular with clients (they used to be the province of international couples or people marrying for a second time with no prospect of more children). Following the Supreme Court case of Radmacher, the status of prenuptial agreements has been enhanced.

The point of a prenuptial agreement is to set out how finances will be dealt with by a court in the unfortunate event of a divorce in the future.

If there is a possibility of a divorce somewhere other than England and Wales then it is best to take local advice about the position abroad. In some countries, prenuptial agreements are binding.

In England, which applies English law to family disputes, prenuptial agreements are not absolutely binding in that one spouse cannot prevent the other from asking a court to look beyond the agreement and to order something different from the terms of the agreement.

To maximise one spouse’s chances of having an effective prenuptial agreement, it is best to:

1. Show that both have entered into the agreement freely and willingly with a full understanding of the implications.

To assist this:

a) Plenty of time should be left before the wedding to instruct a solicitor, have the agreement drafted, negotiated and finalised. It should be signed at least 21 days before the ceremony;

b) Both should take independent legal advice;

c) Both should give full financial disclosure. This will also establish which assets are premarital assets, which is often relevant on divorce; and

2. Try to make sure that the agreement will be regarded as fair in the future if a court looks at it. A solicitor will advise about the fairness or otherwise of the terms of an agreement and whether a spouse’s needs are likely to be met if the agreement is implemented.

Complicating factors

Complicating factors are often whether a couple hopes to have children and/or have children already and whether both are independently wealthy, or whether either or both have inheritance prospects. All the individual circumstances need to be taken into account. A compelling factor is whether the financial provision proposed would be fair to make for the other spouse in the event of a divorce.

The financial outcome may be different depending on when the divorce takes place (it is likely to be fairer to have more generous provision after 30 years and four children than after two years and no children, for example).

A couple contemplating a premarital agreement also needs to think about whether to agree a flexible arrangement which has the advantage of enabling an adaptation to new circumstances in the future, but which may be uncertain and thus leave the potential for arguments, or a more rigid agreement which provides for a certain sum of money after each year of marriage, for example.

More and more already married couples are seeking to take advantage as an increasing number of spouses are entering into a post-nuptial agreement. The advantage of doing this is that the issue of pressure may be avoided and later down the line the situation may be clearer making it easier to agree what would be fair provision. The difficulty of course is that after marriage a spouse may not wish to enter into an agreement, and the "lever" of declining to go ahead with the wedding is not available.

Under English law if a couple cohabits and then moves “seamlessly” into marriage, and then later divorce, the length of the marriage will be taken to start from the date of the cohabitation.

Having a prenuptial agreement may now go a long way to protecting a payer’s position in the event of a divorce, albeit without being watertight.