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30 September 2021

Prenuptial agreements: frequently asked questions

4 mins

Prenuptial agreements can sometimes be a challenging topic for those who are about to get married. It may feel uncomfortable for parties to create a plan for their potential future separation at the time that they are making a lifelong commitment to one another. However, prenuptial agreements are increasingly viewed as a positive, respectful and constructive way of setting a roadmap for how finances should be dealt with, in the event of a divorce.

A prenuptial agreement is, effectively, a written contract between the two parties that specifies how each spouse’s finances are to be dealt with after the marriage. Most commonly, a prenuptial agreement concerns assets that have been accrued by either party before the marriage, or inheritance and gifts from family members that may be received during the course of the marriage. However, a prenuptial agreement is a versatile tool and there are no strict rules about what can and cannot be included. From business shares to intellectual property rights, a prenuptial agreement can deal with a range of assets even including premarital debt.

The benefits of prenuptial agreements

Prenuptial agreements can be effective in providing both clarity and certainty as to what and how personal assets will be divided, in the event of a separation in the future. Although no couple wants to consider the possibility of separating before the wedding even takes place, prenuptial agreements can serve to minimise potential future conflict, as well as time and legal costs, in the event of a divorce. They can also be used to protect inheritance for children of previous relationships, or family businesses where one of the parties to a marriage holds a share and the rest of their family is anxious that it should not be broken up or compromised upon a potential future divorce.

Prenuptial agreements have also been praised for their flexibility. As there is no court involvement in preparing the agreement, the couple has the liberty to be as free and creative as they wish when agreeing their own terms.

Talking about prenuptial agreements may also act as an opportunity to confront financial issues and promote transparency in the relationship. These discussions can encourage open and honest dialogue between couples about issues that may arise in the future.

Additionally, in cases where one or both parties have children from a previous relationship, a prenuptial agreement can protect their financial interest by accounting for their interest in the matrimonial assets.

Are prenuptial agreements legally enforceable?

Although prenuptial agreements are a familiar concept in modern society, English courts did not give them much weight until the case of Radmacher v Granatino in 2010. The case involved two wealthy parties who signed a prenuptial agreement before a notary in Germany whereby they agreed that neither party would benefit from the property of the other, in the event of a divorce. Although Mr Granatino had agreed to not make any claims on Mrs Radmacher’s fortune, he was awarded £5 million by a High Court judge. Mrs Radmacher challenged this decision and it was decided that the prenuptial agreement in place should be given weight. Mr Granatino attempted to challenge this further. However, the Supreme Court heralded that prenuptial agreements have ‘magnetic importance’ and that Mr Granatino should be held to the agreement.

Although they are not legally binding, in light of Radmacher, the court will consider the terms of a prenuptial agreement as one of the relevant factors, when making its decision as to how assets ought to be divided in a fair manner.

What about an unfair agreement or change in circumstance after marriage?

Another important sentiment expressed by the Supreme Court in Radmacher is that pre and postnuptial agreements shall be recognised unless it can be demonstrated that they are unfair in either how they were created or the effect that they would have. As unexpected events can and do occur throughout a marriage, the court may be sceptical in relation to upholding an agreement that could place a party in a financially turbulent or disadvantageous position.

How to get a prenuptial agreement

In order to ensure fairness in the process of obtaining a prenuptial agreement, both parties need to take independent legal advice in respect of the terms of the agreement, to ensure that there is a clear understanding of what the agreement entails.

The Family law team at Bindmans LLP have a wide-ranging experience in providing realistic and tailored advice to parties who are considering entering into prenuptial agreements. For more information on the services we provide, visit our web page here.

Irene Karidas, paralegal in our Family and Matrimonial team, contributed to this article. 

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