Anecdotally, 2024 was the year of the pre-nup for family lawyers in England and Wales, with never-before-seen numbers of young, financially independent professionals seeking the greater clarity and certainty afforded by these agreements, which not so long ago were the preserve of ultra-high-net-worth international families and their offspring, and very few besides.
So, if you have just had a Christmas engagement or you are thinking of a summer wedding, then amongst the blissful bubble (or wedding-planning stress) you may have thoughts of a pre-nuptial agreement on your mind. If so, you will doubtless also be thinking about how on earth to broach it with your intended spouse. And anyway, are they not complicated and time consuming, not to mention unromantic and divisive, and might not even be followed by the court at the end of the day? Perhaps best not to think about it for another week…
The fact is, while all those things can be true, they do not have to be. Where properly considered, it can and should be a straightforward process to enter into a pre-nuptial agreement that benefits both parties, and as an exercise in transparency and forward planning, it provides a platform for entering into a marriage with a full understanding of one another's priorities.
Moreover, recent judgments following on from the Supreme Court decision in Radmacher v Granatino [2010] make very clear that the English court respects the autonomy of contracting couples and will only depart from the terms of an agreement where it has not been properly entered into, or where its terms are clearly unfair, both of which can be avoided by taking expert advice at the outset.
So what really is a pre-nup and what does it do?
A pre-nup is a type of nuptial agreement that sets out how a couple intends for their wealth to be divided upon separation and divorce. Indeed, the pre- in pre-nup only refers to the fact that this type of nuptial agreement is entered into before a marriage, and they are otherwise identical in legal effect to those entered into during a marriage (known as post-nups).
Similarly, a civil partnership agreement has precisely the same effect for civil partners, and therefore references to “marriage” in this article can be read interchangeably with “civil partnership”.
As contractual documents between individuals, these agreements can be entirely bespoke and range from the very straightforward to those which are highly complex. Fundamentally, they can be tailored to meet the specific circumstances of the couple entering into them.
Their flexibility means that they can be drafted to deal with any assets or arrangements you might care to think of in a way that really suits and reflects the parties themselves.
They can include provisions setting out how a couple would like to arrange their finances during the marriage (not just afterwards), and they can even deal with arrangements for pet custody (or you can have a completely separate pet-nuptial agreement).
This can be in stark contrast to the approach taken by a judge if there is no pre-nuptial agreement, where the tools they have available (not to mention the time and budgetary constraints affecting courts up and down the country) can lead to much more blunt solutions that satisfy neither party.
Despite the common misconception, a pre-nup is not simply a weapon for the financially stronger spouse to cut off their partner's claims in the event of divorce.
As I shall go on to explain, in order to carry weight with the court a pre-nup must be entered into entirely consensually, with both parties being able to negotiate freely without undue pressure. Accordingly, a pre-nup that is worth its salt will reflect the ambitions, priorities and circumstances of both parties with equal importance.
The basic requirements
In other jurisdictions, pre-nups are 100 per cent binding regardless of their context and content, even where they are objectively unfair or contain provisions we might think highly inappropriate, for instance extinguishing all provision where there has been infidelity on behalf of the financially weaker spouse, regardless of the behaviour of their other half.
That would not be possible here in England, where pre-nuptial agreements are not strictly binding, but will be followed by the court where certain basic requirements are met. These can be divided into two broad categories: entry and outcome.
Entry requirements
In order to feel comfortable holding people to the terms of a pre-nup, the court requires that certain entry criteria are met. These are as follows:
- The terms must have been freely entered into.
There can be no suggestion that the parties were under undue pressure from the other party (or anyone else) to enter into the agreement against their own free will. If there is evidence of undue influence, duress, misrepresentation or exploitation, this can significantly undermine the weight that a court will apply to the terms of a pre-nup.
In practice, this means that both parties must have the opportunity to freely negotiate the terms over a reasonable timescale. Where a pre-nup is agreed and signed very shortly before a wedding, this could be used later down the line to suggest that the financially weaker party did not have the opportunity to negotiate freely. Accordingly, its important to start negotiations well ahead of the wedding wherever possible.
- The parties must have a full understanding of the implications of the agreement.
This means that not only do they understand the meaning of the terms themselves, but also how they will impact them specifically on divorce, and how this would differ from the court's approach if there were no pre-nup in place.
To deal with this requirement, both parties must have separate and independent legal advice (in all relevant jurisdictions) and they must provide disclosure to one another of their existing financial resources and those they expect to receive in future from inheritance and other sources.
By having received this advice and disclosure, a party is thus prevented from later saying they were unable to make an informed decision at the time of entering into the pre-nup.
Outcome requirements
As with the entry requirements, the criteria as to outcome is – on the face of it – clear and straightforward. The court must consider it fair to hold the parties to the terms of their pre-nup in the circumstances prevailing at the time of their separation and divorce.
What an English court considers “fair” however, is slightly more nebulous, and is very different to the approach in other jurisdictions where, as I have already mentioned, the very fact of the parties having met the relevant entry requirements would mean the agreement is considered fair.
Simply put, the English court has made it clear that it will not follow the terms of a pre-nup where they leave one party unable to meet their housing and income needs.
The concept of needs is elastic and is always informed by the marital standard of living alongside other relevant factors including any children they may have, so will be different for every couple.
When drafting a pre-nup, it can be very difficult, if not impossible, to assess what a party's needs might be many years in the future. Accordingly, it will frequently be necessary to build in tools to deal with this uncertainty.
For example, by including a requirement for the agreement to be reviewed and updated upon certain future events happening, or for a mechanism to be included that ensures the financially weaker party's needs (clearly defined, and perhaps not assessed as generously as a court would do in the absence of a pre-nup) will be met whatever the circumstances are at the time, where the other has sufficient wealth to provide for them.
This can be a challenging notion for those who come from other countries or cultures where there is not the same concept of needs and is another reason to take legal advice at an early stage so that all relevant parties (which may include concerned parents) understand what is required.
What is important to bear in mind is that just because this minimum requirement exists, it does not mean that a pre-nup cannot legitimately and dramatically transform the division of finances on divorce.
Where there is no pre-nup directing otherwise, the English courts starting point is to award a 50/50 division of the wealth generated by a couple during their marriage (excluding inheritance), regardless of how it was made or by whom.
So long as needs are capable of being met, a pre-nup can entirely circumscribe parties' entitlement to share equally in this way. For UHNWs, this could be worth tens or hundreds of millions of pounds. For more modest professionals, on the other hand, it can provide reassurance that their marriage will not infringe upon their financial independence.
Importantly, a pre-nup cannot restrict the court's ability to order provision for any children, so claims for child maintenance will always need to be left open.
How to have that tricky conversation
Every person and every couple is different and unique. There are therefore no hard and fast rules for how to approach discussions about a pre-nup. If it is you who is broaching it for the first time, take care to be sensitive to your partner's circumstances and personality, and think about how to make them feel equal agents in the process, with understanding and a listening ear.
You might consider sitting down with them and talking about what is important for both of you in life, for example:
- What do you both want to achieve in your careers and what support will that require from your partner (if any)?
- What sort of lifestyle do you both want and how do you think this will be funded? Will you want to meet your expenses together, or separately?
- Do you want children and if so, when and how many, and what will this mean for your careers and lifestyle?
- How will you afford the cost of housing and are you likely to receive support from family for this (or in other ways)?
Use this conversation as a way to understand one another's priorities, and to work out what aspects (if any) of your financial affairs you each would prefer to be kept separate, and which should be joint.
For many couples, this might entail keeping separate any wealth generated prior to the marriage, and inheritance received during it, with everything else to be joint. For others, they will prefer greater autonomy during the marriage, and the ringfencing of everything they each generate themselves.
Pre-nups are not for everyone, but where both parties see eye to eye, they can be a really sensible and helpful tool to bring clarity to how wealth should be divided on divorce, helping minimise the scope for disagreement and acrimony.
They can help ensure that couples start their marriages with absolute transparency and help lay the groundwork for an open and collaborative approach to planning their lives together. They may not be sexy, but they are very practical.
Originally published by FT Adviser.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
