Top tips when entering into a nuptial agreement
At Watson Morris, we specialise in family law, which means nuptial agreements are one of our specialities.
A pre-nuptial agreement (also commonly referred to as a ‘pre-nup’) will map out how your finances will be divided in the event of a separation. In Radmacher v Granatino [2010 UKSC 42] the Supreme Court confirmed 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 their agreement’.
We’re sharing our 10 top tips for nuptial agreements; how to comply with this three-stage test as well as the practical steps you can take alongside the preparation of a nuptial agreement to lay the foundations for a strong and secure marriage.
Tip 1: Nuptial agreements are not just for the rich and famous
If there is no nuptial agreement in place, a principle of equal sharing will apply as the starting point to all assets, regardless of their source.
If you have already been through a divorce you will know how stressful it can be. This stress can be compounded by uncertainty and legal fees. A nuptial agreement will enable you to map out how your finances will be dealt with on a divorce and avoid the stress, uncertainty, and legal costs of having to litigate.
The motivation behind a nuptial agreement may also be the desire to leave inheritance to children from a previous marriage or to keep a business in the family. A nuptial agreement can ensure that the interests of the wider family are also safeguarded, particularly if family businesses, trusts or inherited assets are involved.
Tip 2: Talk about your motivation for entering into the nuptial agreement
You may be worried that asking your fiancée to enter into a pre-nuptial agreement will be seen as unromantic or a lack of confidence in the relationship. Explain your motivation so your fiancée understands why you would like an agreement and share with them the benefit of having an agreement.
Tip 3: Use the preparation of your nuptial agreement as an opportunity to talk about issues or challenges that may influence your attitudes or behaviours now and in the future
Discussing challenges that you have now or foresee becoming challenges in the future will help minimise potential for conflict in your marriage. Think about attending pre-marital classes or seeking professional help from a counsellor or life coach. Look at the preparation of your pre-nuptial agreement as an opportunity to lay the foundations for a strong marriage.
Tip 4: Talk about children but don’t try to predict their needs too far into the future
It is very sensible to discuss your intentions regarding having children as well as your views on the upbringing of children. This will help to avoid disagreements during the marriage over issues such as education, medical treatment and culture and religion. It is also sensible to discuss how childcare is likely to be organised and what expectations or views you both have regarding working (or not as the case may be) post children and the use of nurseries or nannies. If you have an international connection, you may also want to consider your long-term living arrangements or need to factor in travel for work or to facilitate contact with wider family members who live abroad.
You will not be able to include childcare arrangements in your nuptial agreement, however, discussing your intentions will help inform what financial needs and circumstances you will need to provide for.
You can include in your agreement financial provision to be made for your children in the event of divorce. Financial provision can include a monthly amount of maintenance or payment towards school fees or other items of financial provision, to include housing. It would however be unwise to include provision for any future children due to the risk of getting their needs wrong and the court departing from the terms of your agreement. In Radmacher v Granatino the Supreme Court said it would not be fair for a pre-nuptial agreement to prejudice the reasonable requirements of any children of the family.
It is possible to leave the financial provision for a child to be decided following the birth of a child, or it can even be left as an issue to be decided on the divorce itself (usually subject to principles in the pre-nuptial agreement setting out the parties’ expectation of need and the type of financial provision that may need to be provided). You can include a review clause in your agreement to cater for any change in circumstances following the birth of a child.
Whilst it is possible to include financial provision for children in your agreement, it is not possible to ‘oust’ the jurisdiction of the court or of the Child Maintenance Service (CMS) to make an assessment. It is not possible to ‘contract out’ of applying for a CMS assessment. If, however, an application for financial provision is made on a divorce, provided the financial provision in the agreement meets the children’s needs the court will be unlikely to depart from the agreement.
Tip 5: Provide material disclosure of your financial position and of any other relevant circumstances
In Radmacher the Supreme Court said that to have a full appreciation of the implications of a nuptial agreement, at the time of signing the agreement, each party should be in possession of all the information material to their decision to sign the agreement. The test is therefore materiality. Each party must have the information they need to make an informed decision on whether to agree the terms of the nuptial agreement.
Whilst financial disclosure is not a pre-requisite of Radmacher, you should each give disclosure of your assets, liabilities, income, trust interests, business assets, pensions, and inheritance prospects to understand how the financial provision in the nuptial agreement will affect the overall division of assets. To confirm that full disclosure has taken place a summary of the disclosure provided should be included as a schedule to the agreement.
Tip 6: Start negotiations early
The first test in Radmacher is for an agreement to be freely entered into. Start negotiations as far in advance of the wedding date as possible to avoid any last-minute pressure. The Law Commission report recommending legislative reform to make nuptial agreements binding recommends that an agreement is entered into at least 28 days before the date of marriage.
Tip 7: Take independent legal advice
Both parties should take independent legal advice to demonstrate ‘a full appreciation’ of the implications of the agreement. A lawyer will also ensure you understand the advantages and disadvantages of entering into the agreement and an understanding of how the court will deal with financial remedy claims in the absence of an agreement. Your lawyer will also be able to guide you on meeting your needs and fairness. If you are looking for a family lawyer, contact the team at Watson Morris today.
Tip 8: If you or your fiancée have a close connection to more than one country take international advice
it is important that you consider which jurisdiction you want to govern your agreement and to ensure that your agreement stands the best chance of being upheld in all jurisdictions you have a connection with.
The legal position on nuptial agreements varies from country to country as does the law on divorce and dissolution in the event of your marriage breaking down. It is therefore important you understand the law in each country and can make an informed decision on which jurisdiction you want to govern your agreement and if necessary, enter into mirror agreements in all relevant jurisdictions.
Tip 9: Make sure your nuptial agreement meets needs
The Supreme Court confirmed in Radmacher that a pre-nuptial agreement would be unfair if it would leave one party in a predicament of need, while the other party is comfortably provided for.
Be cautious about predicting need too far into the future to avoid falling foul of the test of fairness. Regularly reviewing a nuptial agreement or including provision within the agreement to provide for needs as they change overtime will help ensure that the court will uphold your agreement.
Tip 10: Consider entering into a post-nuptial agreement
A post-nuptial agreement (also commonly referred to as a ‘post-nup’) is entered into after marriage. Post-nuptial agreements are used if there has been a change of circumstance after marriage, for example receipt of an inheritance or other significant financial change. They can also be used if there hasn’t been enough time before the marriage to complete a pre-nuptial agreement.
Nuptial agreements from Watson Morris
Our goal at Watson Morris Family Law is to help our clients lay the foundations for a strong and long marriage. With this goal in mind, we have developed our 2Unify service to offer our clients relationship coaching alongside the preparation of nuptial agreements. For more information on our 2Unify service.
Written by Caroline Watson
October 14, 2022
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