A Guide to Prenuptial Agreements

A prenup is a legal agreement made between two individuals before they marry or enter into a civil partnership. 

The agreement itself can set out a variety of provisions as to how the couple intend to divide their assets in the event of any future divorce or family dissolution.

The agreement can also define which assets are classed as ‘matrimonial property’, i.e. assets acquired during the marriage or held in joint names, and those classed as ‘non-matrimonial’ such as inheritance or gifts received by one party or assets owned before the marriage.

This distinction is important as upon any relationship breakdown, the ownership of the assets will already be determined, which avoids any disputes (and subsequent time and costs involved). 

This is in contrast to divorce proceedings without a prenup, as in these cases, depending on the financial position of each party, both matrimonial and non-matrimonial assets may need to be shared equally between the parties so that both parties’ needs are met.

In England and Wales, prenuptial agreements are not strictly binding in the event of a divorce, but the terms of the agreement may be decisive in the event of a dispute that the court deals with unless the effect of the agreement would be unfair.

A prenuptial agreement is a bespoke document and is tailored to your circumstances.

A well-drafted prenuptial agreement will help to provide clarity so that you and your partner make it clear to one another that certain property belongs to you alone and that it will not be shared in any future divorce. 

There are certain things that couples usually include within a prenuptial agreement, including, but not limited to: 

• What will happen to the properties that either party brought into the marriage;
• What will happen to the family home;
• What will happen to any property given to either party or inherited during the marriage;
• What will happen to any personal belongings or possessions owned before the marriage;
• What will happen to any pensions; 
• How you will deal with any debts;
• What is to happen when there is a change in circumstances? (Review clause)

Again, the above is not an exhaustive list. 

Although a prenuptial agreement sets out the parties’ intentions on a divorce, the agreements are not legally binding and so the court retains its ultimate discretion to determine the distribution of the assets on divorce.

However, the existence and contents of a prenuptial agreement must be taken into account by the court when the court considers financial remedy proceedings.

The influence and weight of a prenuptial agreement therefore depends on the circumstances of the case and also the circumstances at the time the prenup was entered into.

This is an important protection as there is the possibility that a prenuptial agreement has been entered into without one party’s full intentions or without fully understanding the agreement they are entering into.

The court would then take this into account when considering how much to rely on the provisions of the prenup.

In the case of Radmacher v Granatino [2010] UKSC 42 the Supreme Court held that: “the court should give effect to a nuptial agreement that is freely entered into by each party with a full appreciation of its implications unless in the circumstances prevailing it would not be fair to hold the parties to the agreement”.

Provided that test is met, the court will give effect to a prenuptial agreement.

In simpler terms this means that the following will be considered by the court:

• whether the prenuptial agreement was entered into by each party of their own free will, without undue influence or pressure;
• the emotional and mental wellbeing of each party and their age, maturity and previous experience of long-term relationships;
• whether the marriage would still have proceeded without a prenuptial agreement in place;
• whether at the time of signing, both parties were in possession of all the information material to their decision to sign the agreement. This doesn’t necessarily mean that both parties were aware of all the assets and income of the other, but that both parties knew what they were entering into;
• whether both parties obtained independent legal advice before signing the prenuptial agreement
• the length of the marriage and the length of time since the prenuptial agreement was signed; or
• the current financial needs and position of both parties.

A prenuptial agreement can give more certainty as to the financial arrangements if you separate and a review clause should reduce the possibility of the nuptial agreement being challenged at a later date. 

Both parties will need independent legal advice on the agreement, and they will need to disclose to one another information about their assets, liabilities, and income. 

It is good practice to finalise the agreement in good time before the wedding or civil partnership ceremony so that both parties have sufficient time to consider the terms of the agreement.