It may not be the most romantic part of planning your wedding but if you are getting married you should consider whether it is sensible to enter into a pre-nuptial agreement (PNA). Linzi Bull and Lidia Cantele, from London law firm Harbottle & Lewis LLP, explain.
Whilst it can be difficult to think about wealth protection and so negotiate the terms of a Pre Nuptual Agreement (PNA) at the same time that you’re picking up your morning suit and choosing wedding cake, it is often well worth doing. Having a PNA in place means you have greater certainty about the financial impact if the marriage irretrievably breaks down and that you may avoid the need to go to Court to resolve those arrangements. The Court process is lengthy and can be both financially and emotionally draining – it is best avoided.
Since the highly publicised Supreme Court case of Radmacher v Granatino in 2010, the Court will give decisive weight to a PNA provided that certain conditions were met. However, it is important to understand from the outset that PNAs are not yet automatically binding contracts.
In the past, PNAs were criticised for undermining the sanctity of marriage and so seen as against public policy. However, things change. The reality is that many more people (and not just the ultra-wealthy) are entering into these agreements because they want the autonomy to regulate their financial affairs.
The Law Commission began a review on the legal position of PNA in 2009 and published their recommendations to the Government in February 2014. The report recommends that certain types of “qualifying” pre-nups should become enforceable legal contracts, provided they are fair. The Law Commission has also set out a checklist which the parties to the PNA must observe to ensure the agreement will be considered valid. You should, for example, sign the PNA at least 28 days before your marriage, receive specialist legal advice and provide financial disclosure prior to signature. The PNA must also meet the financial needs of the parties and that of any children.
Despite change being on the horizon, this health warning still needs to be given: parties to a PNA can still apply to Court for a financial order if they think the effect of the PNA on divorce is unfair. If the Court is persuaded that is not the case, it is likely to make an award which simply mirrors the terms of the PNA. However, if the Court agrees that the PNA is unfair then it can use its wide powers to make a financial award to cater for the needs of the financially weaker party. Therefore whilst it is anticipated that PNAs will have a stronger legal status, it should not be forgotten that they may be open to challenge.
It is likely that the Government will enact legislation on the issue of PNAs within the next year or so. With the benefit of specialist legal advice, those signing up to PNAs in the meantime should take account of the Law Commission’s checklist and those who have already signed PNAs should consider viewing their agreements when it comes in.
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