Sep 24
A few years ago the question of needing a prenuptial agreement was the preserve of only the rich and famous – a statement of good intent rather than a binding document arising out of legislation. Well, whilst pre and post nuptial agreements are not yet legally binding, since 2010 they are far more than a record of mutual understanding. Where “safeguards” have been put in place and “needs” met, the question posed is “why should you not be held to the prenuptial agreement?” You should never enter into a prenuptial agreement if you do not intend to be legally bound.
The safeguards in short are:
“Needs” are an elastic concept and are relative to the family’s lifestyle. It may not be the same lifestyle that you previously enjoyed during the course of the marriage but should not place a party in a “predicament of real need”.
The prenuptial agreements may not only deal with assets held before the marriage but also their increase in value as well as assets that might occur during the marriage like inheritances or the transfer of assets for wealth planning purposes or simply investing pre-marriage assets in something else altogether.
It was this particular question that concerned the recent case of NM v PM [2024] EWFC 199(B). A prenuptial agreement provided for separate property to remain separate including the increase in value. In this case the proceeds of a pension and an endowment policy owned before the marriage was later invested in two properties during the marriage. The wife claimed that the family had stayed at one of the properties on occasion and that she had been instrumental in decoration and furnishing. There was however a clear provenance of the monies used to fund the purchase costs from the husband’s separate pre-marriage assets.
The Court concluded that whilst the manner of the assets had changed to bring these assets into the pot would have ignored part of the prenuptial agreement. It is important to note that this was not a needs based case and whilst one party would be left with less than half of the assets they would not be homeless.
Even when there is a prenuptial agreement the Court is still under an obligation to take into account the statutory factors that parties would normally consider when dealing with a divorce. Prenuptial agreements cannot be used to contract out of providing for a party’s real needs. However where those needs have been met, prenuptial agreements are an effective way of avoiding or, worst case scenario limiting, a potential claim in the future.
The court used an analogy in the recent case of Cummins in 2023 of a bookcase in considering the range of potential outcomes when a judge looks at resolving financial matters between married parties. The space between the bookends are the range of fair outcomes, “the right end provides a comfortable perhaps even luxurious lifestyle. The left a spartan lifestyle catering for not much more than essentials”.
If a prenuptial agreement leaves one of the parties on the wrong side of the bookend and what would be deemed reasonable, any adjustment by the court to the agreement should be improved only to the extent that the provision falls between the bookends to be fair and thus upheld. This means that any assessment of need is looked at broad brush and should be limited and far less intrusive if court proceedings are issued. Good news if you are aiming to reduce conflict and preserve wealth in the event of a divorce.
If you would like to discuss any of the issues raised in this article please contact Carmelita Ardren who is the Head of Family at Raworths. Carmelita is a specialist family lawyer based in Harrogate, North Yorkshire.
The Family Law team at Raworths is ranked in Chambers UK (Band 1) and Legal 500 UK, the leading guides to the legal profession.
Published on 4 September 2024
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