Family lawyers have recently been talking about The Law Commission’s report, Matrimonial Property Needs and Agreement, which includes a draft Bill which would make prenuptial agreements binding.
Prenuptials or ‘pre-nups’ are contracts entered into before a couple enter marriage or civil partnership which make provision for the allocation of assets upon divorce or dissolution. They are commonly used as an insurance tool to ring-fence assets inherited prior to marriage and limit the damage a financially dominant party would otherwise suffer on divorce.
Pre-nups are not binding under the existing law of England and Wales, and London is labelled the ‘divorce capital of the world’ owing to generous financial settlements made by courts. In the landmark Supreme Court decision in Radmacher v Granatino the legal weight of pre-nups was strengthened confirming they were likely to be upheld if not unfair.
Nonetheless, their application still falls subject to judicial scrutiny, as fairness of terms must be considered on a case-by-case basis. Therefore, this is a difficult area for lawyers to advise upon as they are unable to guarantee couples that the terms of their agreements will be mirrored in court orders.
The recommendations introduce the concept of ‘qualifying prenuptial agreements’, enabling couples to enter into enforceable agreements subject to preconditions being met.
The legislative seal on prenuptial agreements is welcomed by some in the industry, as it will pave the way for greater financial control and certainty for couples given the unpredictability of judicial discretion. Some lawyers predict that binding pre-nups will save excessive costs and avoid exposing couples to the acrimony of litigation. Others are concerned about what will happen when couples divorce if the pre-nup agreement does not adequately meet one or other party’s reasonable needs.
So what can we expect for the future if pre-nups become binding? The changes could be sweeping for clients and lawyers alike. Currently couples are marrying later in life and often acquire assets before marriage so are more inclined to seek to safeguard their wealth. Statistically, 42% of married couples in England and Wales see their relationship end in divorce and therefore the changes could result in a surge in instructions to draft these agreements.
Binding pre-nups could result in increased pressure for family lawyers, who will need to ensure that they have taken sufficient details and spent time thoroughly advising on the implications of agreements and all foreseeable future scenarios. Lawyers will need to ensure that the agreements are carefully tailored to clients’ individual circumstances.
The recommendations propose that pre-nups should be signed no more than 28 days before a marriage or civil partnership. This presents challenges if clients seek legal advice only a few months before their wedding, particularly if they do not have a clear idea on terms and if an extensive disclosure exercise is needed. It may be that lawyers have to work harder to realistically manage clients’ expectations of the time required to draft agreements.
We now wait to see whether the Bill will be passed, its impact on law firm instructions and the response of family lawyers if judicial discretion is ousted and the financial fate of clients lies in their hands.
Emel Djevdetis a solicitor and Sehaj Lamba is a trainee at Hanne & Co.