Pre and post nuptial agreements

Nuptial agreements are contracts entered into by a couple for the purpose of defining what would happen to their assets if their relationship failed. 

Commonly these are signed prior to marriage or civil partnership although this does not have to be the case. Where they are signed beforehand, they are known as pre-nuptial agreements, when signed afterwards they are post-nuptial agreements.

When is such an agreement advisable?

Such agreements are entirely voluntary. They give couples greater autonomy and control over their assets. Very often, the driver for signing an agreement will be the wish to protect specified assets in the event of a divorce or dissolution, either for themselves or for their children. Those who might consider an agreement include:

• Parties who have inherited assets, or who anticipate inheriting during the marriage or civil partnership
• Parties with significant wealth who wish to limit their financial exposure in the event of relationship failure
• Parties with interests under trusts
• Parties with corporate interests they wish to protect
• Parties with children from previous relationships whose inheritance they wish to safeguard
• Parties enter into their marriage or civil partnership with very different incomes

Individuals who choose to gift money to their adult children should consider with that child whether an agreement should be put in place to protect that family money before the gift is made. It is not unusual for parents or grandparents to suggest (and in some cases insist upon) such an agreement to protect family wealth.

By defining what should happen if a relationship fails, many couples have greater confidence to enter into marriage or civil partnership knowing they have addressed potential issues. Others will use an agreement as part of an overall wealth management strategy.

Enforceability

The law in England and Wales does not yet formally recognise these agreements. Technically they are not legally binding. However, in recent years these agreements have been taken into account more and more often as courts place greater emphasis on the autonomy of the individual. On 20 October 2010 the Supreme Court of England and Wales ruled that pre-nuptial agreements signed after that date should be entered into on the basis that a court would give effect to that agreement. It is anticipated that it will also be much harder to argue against a pre-nuptial agreement signed before 20 October 2010. As a result of this decision the legal landscape has moved significantly in favour of these agreements.

On 27 February 2014, the Law Commission published its recommendations that agreements should be treated as binding as long as they met specified criteria. It was recommended that such an agreement should be known as a Qualifying Nuptial (or Registration) Agreement (QNA). If that agreement meant that both parties’ needs were met and the interests of any children were provided for, the courts’ powers should be limited, meaning that orders should not be made that were inconsistent with the terms of the agreement.

For an agreement to be treated as a QNA it was recommended that:

• The couple must first have disclosed their respective financial positions to each other
• Both parties must have received independent legal advice about the terms of the agreement
• Neither party should be under duress to execute the agreement
• The agreement should be contractually valid and executed as a deed
• The agreement should not be entered into less than 28 days before the wedding/civil partnership. In the alternative they can be entered into after the marriage/civil partnership (post-nuptial agreement)

Compliance with these requirements will be fundamental to an agreement being upheld by an English court.

The Law Commission’s recommendations have not been enacted yet, nor may they be for some time. However, courts will probably feel emboldened to place ever greater weight on agreements freely entered into before marriage where the Commission’s recommendations have been adhered to.

As stated above, couples should also consider that a nuptial agreement can be executed during a marriage. This may sometimes be a better option if the issue has not been raised until very close to the wedding.

International issues

An increasing number of agreements are being drafted for parties with international interests. In such circumstances it will be important to liaise with foreign lawyers over the terms of such agreements and their use overseas as well as in this jurisdiction.