Most people have heard of a prenuptial agreement, but historically the courts have not given any weight to them.
However, the landmark case of Radmacher v Granatino saw a change in attitude, in which the UK Supreme Court ruled that a prenuptial agreement was binding in a dispute between a German paper heiress and her former husband.
This Supreme Court decision developed a three-stage fairness test to decide how much, if any, weight should be attributed to a prenuptial agreement. As with most areas of law, each case is decided on a case-by-case basis and taking into consideration all of the facts of the circumstance.
In deciding whether to give effect to a pre-nup the following criteria must be satisfied:
- The pre-nup must have been entered into freely by each spouse;
- Each spouse must have had a full appreciation of the implications of signing the pre-nup; and
- It must be fair to hold the parties to their agreement.
Fairness is an elastic concept, but by way of example if there is a considerable difference in the financial position of each party under the terms of the pre-nup – and especially if there are children of the marriage at the time the pre-nup comes to be applied – then the court may not consider this to be fair. The court will not sanction one spouse being left in a position of having limited income or assets whilst the other enjoys considerable wealth or income. The standard is that needs must be met.
Solicitors are often asked why a prenuptial agreement is necessary. The answer is that it will often save a lot of cost and unnecessary stress in the event that the marriage should unfortunately break down. A well-crafted pre-nup will reduce litigation, and therefore costs and emotional stress, and provide certainty in circumstances where the divorce court has an extremely wide discretion to redistribute assets at the point of divorce. Prenuptial agreements can influence the outcome of a divorce, thus giving the couple control if things go wrong.
Many people believe that a prenuptial agreement is for the rich and famous. This is not the case. Some of the most difficult divorce matters we deal with are those with limited assets, where a dispute over a relatively small amount of money can make a big difference to each party. These bitter disputes could be avoided if an agreement has been prepared that sets out how assets should be divided.
Ultimately the court retains broad discretion and can override any agreement, but the court’s approach is to attach appropriate weight to a prenuptial agreement unless following the document would be unfair for one or both spouses.
Like an insurance policy, we all hope that a prenuptial agreement will not be needed. However, like insurance, it is almost always advisable to have one in place, just in case.
The Lester Aldridge family team deal with these issues on a daily basis. We are regularly instructed by clients who wish to protect their assets prior to getting married.
If you would like to discuss any aspect of divorce, separation or arrangements for your children, contact the family team on 01202 786161 or email [email protected].