Nuptial agreements are one way to gain greater assurance of the financial consequences should your marriage result in divorce. Outlining the rights and responsibilities of each spouse in the marriage, agreements of this type go into depth about how assets and liabilities will be split in the event of a breakup or death of one partner.
If one or both of you are entering into a marital or civil partnership with business interests, personal wealth, or an estate of any value, a nuptial agreement is not only advisable, but crucial in order to protect your personal interests in the future, whatever happens.
What are Nuptial Agreements?
The term “nuptial agreements” refers to both pre-nuptial agreements, also known as ante-nuptial agreements or pre-marital agreements, and post-nuptial agreements, also known as post-marital agreements. It also includes documents drawn-up in relation to civil partnerships, such as pre-registration or pre-civil partnership agreements, and post-registration or post-civil partnership agreements.
The nuptial agreement provides couples with a chance to clearly determine the division of assets if the marriage ever dissolves. This contract includes both ‘Matrimonial Property’ (or Joint Property), accumulated during married life (eg, matrimonial homes/joint bank accounts established while together) and ‘Non-Matrimonial Property’, which each partner brought into or acquired after entering wedlock (eg, belongings or business interests acquired before the marriage, inherited resources, and the gifts one side received from the other during the marriage).
The treatment of earnings, as well as present and prospective incomes and interests under trusts, may be included in nuptial agreements.
Although financial provision for already-born children is occasionally addressed in nuptial agreements, this is rarely the case for any future children. Reviewing the terms of the agreement is typically done in response to significant changes in the marriage’s circumstances, such as the birth of children; frequently, a review provision is put into the nuptial agreement outlining when a review of the agreement should occur.
The majority of the time, child-related non-financial arrangements are not included in nuptial agreements.
In what instances are Nuptial Agreements beneficial?
- There is a disparity in wealth between the parties
- There is a future inheritance for one party
- One party has a business, or the interests of stakeholders and employees to protect
- Pass assets to children from prior marriages
- Prevent debts from becoming jointly owned
What are the objectives of a Nuptial Agreement?
Pre-nuptial agreements and post-nuptial agreements have broadly similar goals.
Firstly, they aim to make it clear how the parties will handle their finances during the marriage, allowing the couple to have open communication at the outset. This may also help the spouse who is less well off financially feel more comfortable.
They also enable couples a greater degree of certainty should they want to formally agree on how their assets should be shared in the event of a later separation or divorce.
Lastly, Nuptial Agreements can shield assets against a future financial claim (like inherited riches or premarital property), whilst reducing the possibility of uncertain, emotionally taxing, and financially expensive legal proceedings in the event that the marriage ever ends.
Are Nuptial Agreements binding?
Nuptial agreements may be considered relevant by the courts when considering applications for financial remedy. However, they are not binding and cannot override a court’s ultimate discretion to redistribute assets and income in such cases. The weight given to any nuptial agreement will depend on the individual circumstances of each case but can potentially be decisive if judged appropriate by the court, as per section 25 of MCA 1973 regarding financial relief proceedings under English law.
The Supreme Court has recently clarified that pre-nuptial and post-nuptial agreements are given equal legal weight in the UK – a landmark decision that dispels the notion of any distinction between them, as previously found by MacLeod v MacLeod (2008). Radmacher v Granatino (2010) acts as an authoritative ruling on this matter.
In this case, the Supreme judge debated how much weight a judge should accord a nuptial agreement when using its discretion under section 25 of the MCA 1973, ultimately finding:
“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.”
What is ‘fair’?
The following three guiding principles help determine ‘fairness’ by the Court:
- In order to be fair, housing and financial necessities for both parties must be met. The court should consider a variety of variables while determining these needs, such as the parties’ ages, earning potential, and existing style of living.
- The court should take into account if one party’s financial status is stronger as a result of how the couples divided their obligations during the marriage after necessities have been addressed. For instance, one spouse might have forgone a potentially lucrative career in the City to take on the role of the family’s primary carer, freeing the other spouse to pursue a career that is currently flourishing. Fairness may call for the court in such a situation to grant the financially weaker side some sort of recompense.
- Marriage is a partnership that demands fairness, and as such spouses should be entitled to an equitable division of joint assets, barring any specific circumstance or reasoning which dispels this. For example, non-matrimonial property brought into the union or inherited during it could potentially alter this expectation.
When it comes to Nuptial Agreements, to ensure ‘fairness’, both parties must have entered into the agreement of their own free will, without undue influence or pressure. If there is any evidence of coercion, fraud, misrepresentation, or immoral behaviour, such as the abuse of a dominating position to gain an unfair advantage, the agreement is unlikely to be upheld.
Along with factors like age, maturity, and prior experience in committed relationships, a party’s emotional state at the time the agreement is made is a pertinent consideration. These elements might influence the pressures that influenced a party to sign the agreement.
Key considerations
- Signing a Nuptial Agreement requires full disclosure of any pertinent information from both parties, though it is not necessary to provide extensive financial details. To be certain that each party has fully understood the implications surrounding them signing such an agreement, legal counsel must be consulted for advice and evaluation. This serves as strong evidence that neither individual is unaware or ill-prepared in making this commitment.
- Despite signing a Nuptial Agreement, marriages of longer duration bring an increased likelihood that holding to its terms may not be fair due to unforeseen changes in circumstances. This is especially pertinent for young couples just starting out and with few assets involved compared to more established partners who each possess substantial wealth entering into their second marriage.
- The Supreme Court recognises that it’s important to protect the reasonable requirements of any children born into a family, yet respects adults’ autonomy when forging nuptial agreements. Furthermore, such arrangements should not be deemed inherently unfair for seeking to secure non-matrimonial property prior and during marriage, via inheritance or gift, through lifetime provisions.
Whilst not legally binding, Nuptial Agreements do offer peace of mind to those who enter into them, whilst also providing a pertinent starting point for any contentious negotiations that may arise upon the failure of a relationship. Be mindful though, that Nuptial Agreements often contain specific legal clauses covering business interests, debts, future inheritance, property, savings, and investments, so should only ever be drafted by a qualified, experienced professional.
