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Pre-nups and the law – the truth behind the headlines

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In October 2010, newspapers across the UK were emblazoned with headlines about pre-nuptial agreements being ruled as legal and binding.

The Supreme Court case that caused these headlines (Radmacher v Granatino) attracted a lot of attention, not only because it related to pre-nuptial agreements and a possible change in law, but also I suspect (somewhat cynically!) the fact that the case itself concerned a very beautiful German heiress! As solicitors, we are still feeling the effect of the decision and will be doing for some time.

But were the headlines correct? In simple terms, no they were not. The law is still clear – pre-nuptial agreements are not legal or binding on a party.

The Supreme Court’s decision in the case of Radmacher v Granatino has muddied the water somewhat on the status of pre-nuptial agreements and has made it difficult for family law solicitors – in that we can not provide more definitive advice to couples who wish to consider entering into such an agreement prior to marriage.

The court has stated that when considering the financial issues following a parties’ filing for divorce, it will look to all the circumstances of the case and therefore will give consideration to the fact that the parties have entered into an agreement such as a pre-nuptial agreement.

The court will look to the circumstances that existed when the parties signed the agreement – for example: did they have independent legal advice? Were they of sufficient intelligence to understanding the agreement and consequences of entering into it? Was there disclosure of both party’s assets and income?  Was the agreement entered into freely and willingly?

But even if one or some of these questions are answered in the negative, it does not mean the court will not hold the parties to the terms of the agreement. The court must decide whether the terms of the agreement are fair to both parties now at the time of divorce. There are situations where an agreement may be considered to be unfair, for example if the parties have had children which are not considered in the terms of the agreement. One person may have become disabled or unable to work, or else lost all their wealth. The court will need to balance all these issues in establishing what is fair on a divorce.

On 11th January 2011, the Law Commission launched a three month consultation paper to consider a change in the law to make the pre-nuptial agreements (or Marital Property Agreements) legal and binding. As a solicitor, I would expect that with some conditions attached to what types of assets can be protected, the Government may well agree to a change in law.

What is clear is that if you have a successful or potentially successful business, have received an inheritance or will inherit significant wealth, or perhaps you have properties in your name, then before you consider marrying you should consider entering into a pre-nuptial agreement. Okay, it is not the most romantic of gestures to make to your future husband or wife, but in the longer term it could be the most favourable (not to mention the cheapest!) option.

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