Pre-nuptial agreements: making it legal

Family lawyers have welcomed the Law Commission’s recent recommendation that pre-nuptial agreements should be enshrined in law.

The Law Commission, an independent body which is responsible for analysing current law and recommending changes, has spent three years consulting family lawyers and other interested parties about whether the law should be changed.

What is the current law?

The landmark case of Radmacher v Granatino in 2010 was heard by the Supreme Court, the highest court in England & Wales. The case involved a wealthy German heiress, Katrin Radmacher, who had entered into a pre-nuptial agreement with her husband, Nicholas Granatino. The agreement effectively prevented Mr Granatino from seeking any financial provision from Ms Radmacher on divorce. The Supreme Court decided that, in principle, a judge should give effect to pre-nuptial agreements, provided the agreement had been freely entered into by the parties with a full appreciation of its implications and that it was fair to hold the parties to the agreement. In effect, the decision suggested that in terms of enforceability, there is a strong, but not absolute presumption that a pre-nuptial agreement will be binding. The court stopped short of ruling that pre-nuptial agreements should be legally binding on the basis that it was up to Parliament to enact new legislation to make them binding.

What has the Law Commission recommended?

The Commission has produced a comprehensive 221-page report analysing the current law and potential amendments. In summary, the Commission has recommended that the concept of a “qualifying pre-nuptial agreement” is created by new legislation. These qualifying agreements will be legally binding in the event of divorce.

To qualify, an agreement made either pre- or post-nuptially must:

• Meet the usual contractual criteria i.e. involve no fraud, undue influence or misrepresentation.
• Be signed no less than 28 days before the wedding.
• Contain a statement that the couple understand the agreement is a qualifying nuptial agreement that will partially remove the court’s powers to make financial orders on divorce.
• Both parties must have had separate legal advice on the agreement.
• Both parties must have made full disclosure of their financial circumstances. 

If the qualifying agreement meets the needs of the parties and any children, it will be binding and the court will not be able to make an order different from the terms of the agreement. It should be noted that an agreement that did not meet these criteria would not necessarily be void but it would not be binding.

What happens next?

The Government will now need to consider the Law Commission’s recommendations and consider whether to follow them and enact new legislation introducing qualifying pre- and post-nuptial agreements.

A pre- or post-nuptial agreement is still the most effective form of wealth protection when marrying. If the Commission’s recommendations are implemented, they will become an even more effective tool in preserving wealth on divorce.

What does this mean for me?

If you have any clients who may be in need of advice on such an agreement, or you wish to discuss any if the issues raised in this newsflash, please get in touch.