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Are prenuptials worth the paper they are written on?

Are_pre_nups_worth_the-Paper_They_are_written_on

The short answer is yes. 

Prenuptials must be considered by the court as a factor of the case, in the event that there is a dispute as to how to divide up the assets and income on divorce.

When determining terms of financial settlement on divorce, prenuptial agreements must always be given weight, and often decisive weight as part of the circumstances of the case.   They may affect not only whether to make any award at all, but also the size and the structure of any award.   The following propositions of law are drawn from the leading case of Granatino v Radmacher:

  1. It is the court, and not the parties, that decides the ultimate question of what provision is to be made;
  2. The over-arching criterion remains the search for 'fairness', in accordance with section 25 as explained by the House of Lords in Miller/McFarlane(i.e. needs, sharing and compensation).   But an agreement is capable of altering what is fair, including in relation to 'need';
  3.  An agreement (assuming it is not 'impugned' for procedural unfairness, such as duress) should be given weight in that process, although that weight may be anything from slight to decisive in an appropriate case;
  4. The weight to be given to an agreement may be enhanced or reduced by a variety of factors;
  5. Effect should be given to an agreement that is entered into freely with full appreciation of the implications unless in the circumstances prevailing it would not be fair to hold the parties to that agreement.   i.e. There is at least a burden on the husband to show that the agreement should not prevail;
  6. Whether it will 'not be fair to hold the parties to the agreement' will necessarily depend on the facts, but some guidance can be given:

i) A nuptial agreement cannot be allowed to prejudice the reasonable requirements of any children;

ii) Respect for autonomy, including a decision as to the manner in which their financial affairs should be regulated, may be particularly relevant where the agreement addresses the existing circumstances and not merely the contingencies of an uncertain future;

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House of Commons Library | Briefing Paper | Pre-nuptial Agreements 2017

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A pre-nuptial (or pre-marital) agreement is an agreement made by a couple before they marry or enter into a civil partnership, which sets out how they wish their assets to be divided if they should divorce or have their civil partnership dissolved.

The House of Commons Library Briefing Paper is available for you to download here.

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Prenuptial Agreement Set Aside as Unfair (KA v MA 2018)

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In a recently reported case, a wife successfully argued that she should not be held to the terms of a pre-nuptial agreement which limited her entitlement to c£1.6m.  Instead, she was awarded:-

  • A housing fund of £1.35m; and
  • Capitalised spousal maintenance of £1.6m

The parties had met in 2000 and married in 2008. By then they had one four-year-old child together and the wife had given up her career to care for him. They were living together in the husband’s pre-owned substantial property in Berkshire and his business interests were worth in the region of £30m.

The husband’s case was that the wife should be bound by the terms of the pre-nuptial agreement. The wife’s case was that the pre-nuptial agreement was unfair and failed to meet her reasonable needs.

The Judge found that the terms of the pre-nuptial agreement were unfair and should not be upheld in circumstances where:-

  • The parties had enjoyed a budget of £1m a year during the marriage, of which up to £250,000 was spent on holidays.  
  • The husband would continue to be able to draw £1.5m net from the business each year. 
  • The family home was worth just over £3.5m.

KA v MA [2018] EWHC 499 (Fam)

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Prenuptial Agreement Set Aside as Unfair Luckwell v Limata [2014] EWHC 502 (Fam)

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In a 2014 case, a pre-nuptial agreement was not upheld in circumstances where, had it been, the husband would have been prevented from buying a home or paying off his debts.  On the other hand, his wife would have continued to live in luxury with the children.  The judge said: "If all the facts were the same but the genders reversed, it is inconceivable that the pre-nuptial agreements would outweigh making a substantial award to the wife, even if the children were primarily living with the husband and only intermittently staying with her."

The couple married in July 2005 and had three children. They split up in 2012 following rows over money. The husband had no assets at all. His net debts, including all he owed in costs, amounted to about £226,000. The wife was property rich and owned the £6.7m house she lived in. In July 2005 the couple had signed a pre-marital agreement, and then two supplementary agreements.

The wife said she was "distressed" by the ruling. She said her husband had contributed nothing to the marriage in terms of capital and had made repeated promises not to claim against her family's assets.

The husband’s solicitor said that he was given sufficient funds to meet his real financial needs, including a home in which to live, having made financial contributions himself during the marriage from employment and his own inheritance and "Marriage brings with it important legal and moral obligations to care for the other spouse in a time of need, including if a marriage breaks down.  Whilst those obligations can be properly regulated and defined by a pre-nuptial agreement, it cannot be right for it to remove entirely the obligation to provide for real need."

Luckwell v Limata [2014] EWHC 502 (Fam)

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