14
ISSUES: Marriage
Chapter 1: Marriage
Prenups: only for the rich?
By Hilary Pennington-Mellor, Family & Matrimonial, Probate & Estate Planning
T
he notion of a prenup can
conjur up images of wealthy
spouses seeking to protect
holiday homes in the Bahamas or
sprawling, countryside mansions. But
these types of agreements are fast
becoming a popular choice, across
the UK, for couples from various walks
of life. In this article, family lawyers
Zoë Bloom and Hilary Pennington-
Mellor, along with tax and wealth
management lawyer Sarah Noake,
explain why prenuptial agreements
can work for any couple.
What’s mine is mine
As the age of those entering into first-
time marriages continues to rise, it’s
logical to expect many of them to
have spent time amassing more, in
terms of assets, on their own, which
they want to shield from the prospect
of divorce. Nuptial agreements form
the best insurance parties can enter
into, to give certainty in the event of
a family breakdown. The only possible
argument for them being “not
relevant” is in circumstances where
there is only enough money available
to meet the separating parties basic
needs, in terms of where they will
live and how they will be supported
following a divorce. Even then, when
coupled with mortgage capacity and
the expectation that parties move
to cheaper parts of town, or perhaps
rent, a prenuptial agreement will help
determine the best outcome for the
parties with limited court interference.
Nuptial agreements are usually
entered into when times are good
and there is a common intention to
find an agreement which works best
for both parties. That is a far better
environment from which to come to
an agreement which has the potential
to work in the long term and be fair.
Negotiating agreements after the
end of a relationship, when parties
are filled with animosity, distrust and
bruised emotions cannot be a good
time to find workable solutions for the
common good.
In the courtroom
While these agreements are not legally
valid, their terms need tobe transposed
into a consent order at the point of
divorce and they always carry the risk
of causing disagreements – if the court
is asked to rule on the outcome, the
strong likelihood is that, in the absence
of vitiating circumstances (e.g. one
party was forced to sign or they did
not have the opportunity to seek legal
advice), then the court will do its best
to stick to the terms of the agreement.
It will usually come away from the
terms only if they are very unfair or
unworkable and even then, will often
stick as closely to the agreement as it
can. Many judges take the view that if
there was an agreement and one party
acted in a particular way because they
thought there was an agreement that
agreement should hold, if possible.
Zoë Bloom says “I was recently in
court with a client who told me she
had approached a solicitor to ask
whether she should enter a nuptial
agreement to ring fence her £134,000
contribution to the purchase price of
the family home and was told not to
bother. I am told that she was advised
that, in circumstances like hers, it was
a pointless exercise and the court
would override the agreement in
the interests of achieving fairness
between her and her ex-husband.
Apparently, that solicitor had equated
fairness with equality and determined
that the court would simply divide
the property in half regardless of
any agreements which had been
entered into. Thus far, the client
had spent £20,000 trying to secure
her contribution of £134,000. In the
alternative, a nuptial agreement would
have cost £3–5,000 + VAT for advice for
both parties and would have hopefully
saved the £20,000 court costs. I am
increasingly arranging to meet parties
together with the other legal advisor
to thrash out an agreement in a
morning. Everyone leaves the meeting
with a full copy of a signed and agreed
nuptial agreement. This saves hours
of time in sending copies between
legal advisors, amending drafts and
negotiating terms. It gives the parties
a far better sense of control over the
process and input into their wishes
and avoids everything being dragged
out which can lead to disagreements.”
Consider the circumstances
Hilary Pennington-Mellor adds “All
those contemplating marriage will
be wise to consider the financial
consequences of marriage and of
marital breakdown. Think of the
consequences to others where there
is a family business, partnership or
shareholding, where there are existing
dependents, if one party introduces
significant assets, or if there is inherited
wealth, or significant disparity of
asset base. If one intended spouse
has assets or resources overseas (for
example the US) both may need
advice on otherwise unforeseen
taxation consequences of property
ownership and worldwide income.
Also consider jurisdictional points, and
laws regulating marriage divorce and
child rearing in another country. There
is still no absolutely watertight route
to limit or define the assets receivable
by one party tomarriage on separation
following marital breakdown. Judges
are increasingly willing to grant a
degree of autonomy to separating
couples to allow them to decide how
they will divide assets on divorce,
but the court retains power to make
an order which does not reflect the
parties agreement in its entirety. But
the court will have regard to a properly
made pre-marital agreement and it is
likely to be influential although not
enforceable.”
How do prenups work
overseas?
“Pre-nuptial agreements are often part
of an estate plan (wills, documents
covering loss of capacity, setting
up trusts) that clients undertake,
particularly in civil code countries or
America, says Sarah Noake.
“It can be a challenge for clients, who
become UK residents, as they may
not realise that the English courts
take a different view of pre-nuptial
agreements than their home country.
It is important for couples who have
moved to the UK from abroad, and end
up divorcing in the UK to take advice to
try and ensure that the settlement they
