Should Prenuptial Agreements Be Legally Binding?

With recent changes to UK divorce law allowing applications of no-fault divorces as well as separating couples being able to apply for a divorce on line, should prenuptial agreements (PNAs) evolve to have more legal standing?

A PNA is a contract between a couple, before they marry, setting out how finances and other assets will be divided in the event of the relationship ending in divorce. It can help couples avoid nasty surprises in terms of their finances at an already distressing time.

In Scotland, the Family Law (Scotland) Act states that, so far as the couple were sound mind at the time of making an agreement and it was seen as reasonable and fair a PNA agreement will be legally binding. This is a contrast to England and Wales, where although a PNA has begun to give weight to a decision regarding finances in a divorce, it is not legally binding.

In the landmark case of Radmacher v Granatino, the validity of a PNA was called into question, the outcome set a precedent and 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’.  Baroness Hale added that ‘this area of law is a mess and ripe for review’.

The Family Justice Council, in 2014, published a recommendation with an aim to introduce a draft bill making PNAs or ‘Qualifying Nuptial Agreements’ legally binding, provided certain conditions and safeguards were met, this again has not been implemented by the Government. At present there is a draft bill awaiting its second reading in the House of Commons, 9 months after it was introduced. The Divorce (Financial Provisions) Bill, would introduce legislation making pre-nuptial agreements valid should they meet the requirements, including obtaining independent advice prior to the agreement.

Recent cases have been giving weight to PNAs, however the Court will still use its discretion if it feels that the needs of both parties and any children are not being considered or seen as unfair, as in Brack v Brack. Agreements must also be seen as validly created; Mostyn J in Ipecki v McConnell rejected the PNA due to the fact that the husband did not have ‘a full appreciation of the implications of the agreement when he had no legal advice at all about the impact of New York law.’.

With more couples marrying later in life, second marriages involving children and couples wanting to ring-fence assets, we asked experts whether they think the Government should be acting quicker to give couples greater certainty and more financial control through legally binding PNAs, before they enter a marriage?

Lorna Tipple, Associate Director at Thursfields said: 

“Clarity and certainty in this area is well overdue and the fact that the Family Justice Counsel’s 2014  recommendation has fallen on deaf ears is troubling.  So long as safeguards are put in place and certain conditions adhered to – for example, that full disclosure is provided, independent legal advice sought and that the agreement properly caters for children; having a clear law embodied in statute, stating that a PNA will be upheld would provide certainty and avoid unnecessary stressful, expensive and risky litigation in the future.  Perhaps in the wake of the no-fault divorce legislation, there should be a renewed effort to approach the Government once again to review the status of PNAs.”

Melanie Hartley, partner, Ridley and Hall Legal Limited commented. She said:

“No – although PNA’s are advisable in the above circumstances, the Family Court needs to retain discretion and the power to overlook them because financial situations and intentions can change over a period of time such as on the birth of a child, and a PNA may not reflect a fair settlement on divorce which could cause one party to suffer undue hardship if it was legally binding. In my view the current position on PNA is sufficient and should remain.”

Helen Thewlis, Partner and collaborative lawyer at Ramsdens Solicitors LLP further comments. She said

“I would be of the view that to provide couples with certainty in the event of a marriage breakdown that pre nup agreements are enforced by the courts providing:

• They are fair to the parties and ensure that needs are met as fairly as possible bearing in mind the parties circumstances pre and post marriage
• The parties have fully disclosed all their financial circumstances to the other party
• Both parties have sought appropriate legal advice and where necessary financial advice as well
• The agreement has not been made with party under duress

“The above should cover all marriages whether first or second to ensure moving forward all parties know their legal and financial position. I am often consulted by parties entering into second marriages when they both have children who they want to protect in a divorce but the parties also need to ensure that their wills reflect the pre-nup agreements and any property purchases are protected with declaration of trust deeds so advise from both matrimonial lawyers and private client and conveyancing lawyers are also essential.”

Donna Rose, Family Solicitor and Mediator at Amphlett Lissimore adds:

“The shape of the modern family is becoming more diverse. The incidence of a couple marrying in their early 20’s starting out with nothing financially and building up their joint finances are lessening.

“The divorce rate is high, as are second and subsequent marriages.  For those who enter a marriage with pre-acquired property, their wish to safeguard it in the event of divorce is understandable, as is their wish to financially protect any children from a former marriage.

“In the absence of legislation, the Court has confirmed that adults marrying freely with full financial knowledge can make fair arrangements that suit their particular circumstances. So as long as the welfare of any subsequent children are provided for, I believe that prenuptial agreements should be recognised with certainty in family law. This is because it occurs consensually when the relationship between the couple is loving and ongoing and hence there is a sense of “fairness” is unclouded by the bitterness of a separation.

“It may also in fact have other benefits outside of the law, for example, a prenuptial agreement could serve to help in building the relationship and trust between the children and their future step-parent if they know their parent is marrying for the right reason.”