Readers may be interested to read the following article from Teresa Cullen, our new matrimonial partner, about an important new development concerning pre-nuptial agreements.
Prenuptial agreements (pre-nups) are to become legally binding, according to the report of the Law Commission, advance notice of which was given earlier this week. At the moment such contracts are not legally binding in England and Wales but they are given decisive weight following the case of Katrin Radmacher and her husband in 2010 as long as one party is not left “in need” or if there was unfairness.
The idea is that the parties are free to ring-fence assets which they had, whether these are assets in existence at the time of the marriage, or acquired afterwards. They can also seek to limit both the duration and the amount of maintenance paid to either party. It is likely that the Commission will impose certain safeguards in order for these agreements to be legally enforceable such as a requirement that both parties take independent legal advice so that they fully understand the nature of the agreement they are entering into. Pre-nups are common in many of the States in America, and also in a number of jurisdictions in Europe, where they are considered the norm.
It is rumoured that pre-nups entered into at the current time are likely to be enforceable if the proposals become law.
There is a necessity for a new law to be made to give effect to this, but it is hoped that this will be in place prior to the next general election.
The benefit of a pre-nup, assuming it is legally enforceable, is that the parties determine how they would like their assets to be divided and other financial arrangements. Although this brings certainty, rather than the current uncertainty depending on the various courts dealing with the matter, it may well breed other concerns as to how the definition of fairness is applied. Particular care needs to be given to the question of what happens once children arrive, particularly if one or other party alters their working pattern in order to provide childcare. A final version of the report is due later this month.
A number of celebrity couples are thought to have had the benefit of a pre-nup, including Michael Douglas and Catherine Zeta-Jones, Liz Taylor and Larry Fortensky, and Donald Trump with both his first and second wives. Is it romantic to sit down with your proposed spouse to discuss how to divide the assets? Some will say no. Is it worth trading the lack of romance for certainty? We shall see.
Teresa Cullen, Partner, Fladgate LLP