In this episode, Charles Tennant talks about prenuptial agreements and answers some of the most commonly asked questions, such as:
- Are prenuptial agreements legally binding in England and Wales?
- Why should couples consider making a prenuptial agreement?
- How can a solicitor help someone make a prenuptial agreement?
- What should someone do if they’re asked to sign a prenuptial agreement?
Transcript
Paul Harvey
Hello and a very warm welcome to this podcast on behalf of Warners Law. I have the pleasure of having Charles Tennant with me today, who is a Partner and Solicitor specialising in Family Law with Warners Law. Very warm welcome, Charles.
Charles Tennant
Hello, Paul.
Paul Harvey
So the topic for discussion today is prenuptial agreements, Charles. And if I can start off with an obvious question. What is a prenuptial agreement? And are they legally binding in England and Wales?
Charles Tennant
A prenuptial agreement is effectively a written agreement between two individuals who are intending to get married, although it might be slightly different if you were intending to enter into a civil partnership. If you are intending to get married, it’s an agreement that sets out what is to happen in the event that the marriage breaks down in relation to their financial affairs.
And in relation to your second question, whether or not they’re legally binding, well, that’s actually the most crucial issue of all. And very simply, if certain conditions are met, then it is likely they will be binding. But as a matter of law, this is where English law is always quite difficult or unusual. Technically, nothing ever actually can bind the court.
The court retains its discretion. What that means is that the court can always take its own view and can’t be bound simply by something that the parties entered into years earlier.
Paul Harvey
Okay. Thank you for that clarification. Now, why should couples consider making a prenuptial agreement? And how can a solicitor help someone make a prenuptial agreement?
Charles Tennant
The reason why couples should consider making a prenuptial agreement is that by doing so, they’re hopefully going to ensure that in the unlikely and we hope avoidable event that they get divorced. They don’t have to go through unpleasant negotiations, discussions, or potentially litigation. The idea is that you take all of that away and you replace it with a plan, an agreement that’s in place so that if they do get divorced, it’s straightforward and everyone knows what they’re going to leave with.
So that’s what the purpose is. It’s particularly important for couples who are perhaps in their second relationship, so couples who’ve been married before. The other situation where it’s often particularly important is where you have a couple where perhaps one of them has received a large inheritance or large gift.
And how could a solicitor help in some way make a prenuptial agreement?
Well, primarily, the responsibility of the solicitor is to elicit the information they need from one of the parties, one of the people entering into the prenuptial agreement, and then to actually draft the agreement itself to create the bespoke document that reflects the parties’ wishes and intentions.
Paul Harvey
So what should somebody do if they’re asked to sign a prenuptial agreement?
Charles Tennant
First and foremost, they must not sign it. What they need to do is get independent legal advice from a family law expert who specialises in dealing with prenuptial agreements. That’s the key point, not to just rush into it. They must have advice, so that they understand what they are committing themselves to.
Paul Harvey
And what should be included in a prenuptial agreement?
Charles Tennant
There are quite a few areas that need to be included. In very simple terms, first and foremost, there has to be some context. What that means is that there has to be some information about what the parties respective financial positions are today. So to use that example of someone who’s received an inheritance or a gift, they would set out the details of what has been received or what it’s worth today.
And then, obviously, the crucial operative part of the agreement is what the actual deal is or the terms of the deal so that it’s clear what happens in the future in the event of a breakdown of the marriage.
Paul Harvey
And what happens during a divorce if the couple has a prenuptial agreement in place?
Charles Tennant
Well, if the agreement has been properly drafted and if it complies with the conditions that the court has set, then provided that the agreement’s terms meet the parties’ needs, then effectively, the usual arrangements or the usual process for resolving the financial arrangements will be circumvented. And you will find instead that you’ve already got the agreement. So subject to being satisfied, you’ve met those conditions and that they meet needs (that’s generally what we call capital or housing needs). Then there’s no further dispute or debate between the parties.
Paul Harvey
And are prenuptial agreements just for wealthy people, or is that just an unjustified perception?
Charles Tennant
No, they’re absolutely not for wealthy people. They are absolutely helpful for anybody who might be entering into a second marriage or the person who might have the prospect of receiving an inheritance in the future. Because not only can you make provision in the prenup at the time you enter into the marriage in relation to those assets you already hold, but you can also make provision for what is to happen to assets that you might receive or inherit in the future.
Paul Harvey
And do you need separate legal advice on all this?
Charles Tennant
Yes, that’s an absolute requirement. Both individuals need to have independent legal advice. And you will generally find that at the back of the prenuptial agreement itself, there is a certificate for each separate lawyer to sign confirming that they’ve given the advice and that they’re satisfied that their client has understood the advice that they’ve been given.
Paul Harvey
And I guess that the disclosure of all assets is essential.
Charles Tennant
It absolutely is. That’s another one of the key conditions that have been set by the court. So that’s not terribly demanding or time-consuming. It simply means that there’s got to be a clear indication of what each individual’s assets are.
Paul Harvey
And if there’s a change of circumstances, how does that affect things?
Charles Tennant
That could be really very important indeed. And that’s the fundamental difficulty with prenuptial agreements, which is that one is attempting to rub the crystal ball and look into the future. The problem, of course, with real life, and with families is that you really don’t know what the future holds. So to a certain extent, when one is entering into a prenuptial agreement, one is taking this view about what one thinks the future holds and of course, if the parties’ lives go in a different direction if there’s something that you had not foreseen then it is quite likely that the terms of the prenuptial agreement would not hold. So, a good example might be if the parties had children and it turned out one of those children had a disability, then that might mean that the terms of the prenup, the parties could not be held to it.
Paul Harvey
When does a prenuptial agreement need to be entered into? Charles, how crucial is the timing on this?
Charles Tennant
Timing is important. In an ideal world, the advice guidance would be to enter into the prenuptial agreement not less than three months prior to the wedding or celebration of the marriage. Having said that, provided they enter into it 28 days prior to the celebration or marriage, that is satisfactory. The real issue is when they’re trying to enter into it less than 28 days in advance, of the celebration or the marriage. In those circumstances, what you probably find is that you have to consider entering into what’s called a post-nuptial agreement after the marriage to ensure that there’s no risk of the prenuptial agreement falling by the wayside, even though actually the two documents will probably be almost identical. The point will be that one of them will be entered into after the marriage when it’s clear that there’s no risk of someone having been pressurised to sign it because the wedding is the following day.
Paul Harvey
So what do you do if you’ve left it too late to ensure that a prenuptial agreement is entered into in good time prior to the marriage?
Charles Tennant
You absolutely still go ahead and get some legal advice. I’ll be totally honest. A number of my current clients have left it pretty late. If you come to me, say, 12 weeks in advance of the date of the wedding, we can probably still get it done (that crucial 28 days in advance). Even if it’s later than that, I would still say, come in and get the process started and if we have to, we will focus on drafting a post-nuptial agreement so, as I say, it will look almost identical to the prenuptial agreement. It will just be entered into after the marriage rather than before the marriage. It performs the same purpose and achieves the same outcome and end result.
Paul Harvey
Just out of interest, Charles, how did COVID impact on the kind of timing for these prenuptial agreements being in place at the right time?
Charles Tennant
I’m not sure it would have made a great deal of difference, and I’ll tell you why because, of course, the difficulty of COVID meant a lot of weddings didn’t happen. So you might have entered into a prenuptial agreement and then not gotten married, in which case in that scenario, the prenuptial agreement, whilst it will always refer to the date of a wedding, it will always say or such alternative date as the parties decide to get married.
Paul Harvey
And I know you’ve touched on the post-nuptial agreement side, but how essentially does a prenuptial agreement differ from a post-nuptial agreement?
Charles Tennant
On paper, it looks very different. The real reason is, or the real key difference is, why is it happening? And what you tend to find is that a postnuptial agreement is entered into for one of two reasons. Usually, it’s because what is provided for in most prenuptial agreements is some sort of review clause, some sort of ‘we’re going to come back and take a look at this’ probably X number of years ahead and consider whether the terms of what we’ve entered into now remain fair.
So a lot of individuals will enter into your post-nuptial agreement just because they had considered and agreed to do so when they had agreed to a prenuptial agreement. The other scenario in which you find individuals entering into post-nuptial agreements is where perhaps there’s been a trial separation. They’ve decided to get back together. During that separation process, they took some legal advice they thought it was going to be ghastly to go through a big contested battle with a dispute, so let’s sign up for a post-nuptial agreement now. So, if the reconciliation isn’t a success, we’re not going to have to have that big battle.
Paul Harvey
And are some assets easier to protect than others?
Charles Tennant
On paper, it probably does not make a great deal of difference, but in reality, it is always going to be easier to protect assets that have been kept to one side and have not formed part of the matrimonial pot of assets, in particular, what I’m thinking of here is properties. So if someone inherits a property and, for example, they rented out it is tenanted and they receive an income from it, then it’s always going be relatively straightforward to point to that asset as part of their asset pot and say this is kept to one side. If, for example, somebody inherits a property but they live in it and that’s where the married couple live, then arguably, it’s not so straightforward because it’s the matrimonial home. The matrimonial home, as is well known, has its own central place in the way that divorce law is dealt with.
Paul Harvey
And a final question, which is probably quite pivotal in this discussion, is the one that asks the question, do prenuptial agreements need to be fair? But I guess that’s a very subjective kind of area, isn’t it?
Charles Tennant
Ironically, they probably don’t need to be fair. But what they do need to do is to ensure that needs are met. Primarily that’s capital needs, primarily that’s housing needs. So if you have a prenuptial agreement that leaves one party housed in a splendid, valuable home worth millions of pounds, but leaves the other party on the street, then that’s never going to work, that’s not fair. It’s not going to be upheld by the court. So the trick for the person who wants a prenuptial agreement and wants to protect their assets is to ensure that there is enough provision in there to meet the other’s needs. But less than a court might have awarded them had there been a dispute.
Paul Harvey
So you’re obviously very fully practised and acquainted with drawing up prenuptial agreements. Charles, do you find this is a very kind of emotional area when it comes to couples that are breaking up or I suppose if you’re asking your partner to sign a prenuptial agreement, does that cause conflict straight away? If there isn’t that conflict there in the first place?
Charles Tennant
Fortunately, it doesn’t seem to and that’s because it does seem that most couples, by the time they have got to the point of consulting lawyers have sort of already accepted in principle a prenuptial agreement is going to be in existence. My experience is that you tend to find that when you peel back the layers of the onion, actually, there have been quite a lot of discussions about it and that by the time they come to see the lawyers, it’s already pretty settled between them that it’s going to be there, so it doesn’t seem to cause too much disharmony. But certainly, you don’t want them to be negotiating on the terms of their prenup days before their wedding. That, I think, is something that really must be avoided. I can’t imagine it would be a pleasant experience for anybody. It’s a happy event getting married. The problem is, it’s a rather artificial exercise entering into a prenuptial agreement. But there we have it.
Paul Harvey
Charles, thank you very much for answering all those questions very efficiently. If people want to get hold of you on this topic, Charles, how can they do that?
Charles Tennant
They can contact me by telephone. My direct dial is 01732 747956. And, of course, the email address, which is [email protected].
Paul Harvey
Thank you very much, Charles.
I’ve been with Charles Tennant today, specialising in family law and especially on prenuptial agreements. Charles Tennant is a partner and solicitor with Warners Law.