How Prenups Can Short-Circuit A Costly Divorce

01 February 2008

Couples contemplating living together quite often enter into an agreement before buying a property so they can sort out mortgage contributions and other outgoings. Couples getting married are generally far more reluctant to do so.

But discussions relating to money, where you are going to live, how soon you intend to have a family, whether you will both work full-time and how much you are going to spend on your wedding are fundamental to the business of getting married.

Dismissed by some as unromantic, demonstrating a lack of trust in a future spouse, prenuptial agreements are, in fact, just like any other kind of insurance – and could make the entire process a lot less expensive in the unhappy event that the relationship breaks down.

‘Prenups’ aren’t enforceable in law – in other words whatever agreement is made by both partners, it can always be set aside by the court in a divorce case if it is unfair to one party.

Although Parliament shows no sign of changing the law, increasingly the courts are paying heed to the declared intentions of both parties when it comes to dividing assets in a divorce. And in one or two cases they have simply upheld the settlement which the husband and wife agreed in advance.

Crossley v Crossley

At the end of last year in the case of Crossley v Crossley, the Court of Appeal held that where there was a prenuptial agreement the judge had a discretionary power to require a party to show good cause why a prenup shouldn’t govern the division of assets on the dissolution of the marriage.

The parties married on January 5, 2006. By March 2007 they had separated and on August 15, 2007 the wife petitioned for divorce.

The prenuptial agreement was dated November 16, 2005. The critical clause was article 8 which stated essentially that each party should walk away with what he or she had brought to the marriage and article 8.3 (c) that neither party should apply for an order for financial provision.

Mr Justice Bennett ruled that the parties didn’t have to produce the customary documentation relating to their financial statements on disclosure of assets and neither was to prepare a questionnaire. Instead he ordered the wife’s solicitor to write a detailed letter setting out the wife’s case concerning alleged non-disclosure of other assets by the husband.

His order was upheld by the court of Appeal on December 19, 2007.

While it’s still not possible to guarantee that the court will uphold an agreement, the burden of proof appears to have shifted to the party who says that the agreement should be set aside.

If they fail in their attempt the savings in costs - resulting from the usual requirement of providing detailed and up to date financial disclosure at the time of the proceedings – will be considerable.

How to maximise your chances

There are a number of ways a couple can maximise their chances that the court will pay close attention to the settlement they both considered fair when considering it before their marriage.

The most obvious is to make sure both seek independent legal advice over the terms of the agreement. It’s also essential to disclose to your future spouse exactly what assets and expectations you have.

The more eventualities your agreement provides for – such as the birth of children - the more likely the court will give it serious consideration.

It is very important that both partners have time to consider an agreement and discuss any changes they want to make. Presenting your future bride/groom with an agreement the week before the wedding and demanding she / he sign it or you’ll call the whole thing off is hardly likely to endear you to the judge should you later divorce – just assuming you made it up the aisle in the first place!

Prenups aren’t just for the wealthy

Most people think that prenuptial agreements only apply to the wealthy. But there are other couples for whom they are particularly appropriate. Those who have already been through the divorce process, for example, and are put off the idea of remarriage. Or divorcees and bereaved spouses with grown-up children who may see their parents’ remarriage as a threat – not least to their inheritance.  

It is open to a couple to define the scope of the agreement so as to cover as many or as few issues as they wish. As an example, the agreement can deal solely with how they choose to deal with particular contributions such as property they inherited after the marriage or property in a trust, leaving the court to deal with other assets.

Sensible people discuss things in advance. Talking about what might happen if things don’t work out no more indicates an intention to split up than buying insurance suggests the desire to have an accident.

For more information contact Anne Blenkinsop

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