Are pre-nuptial agreements binding in the UK?

What is a pre-nuptial agreement?

A pre-nuptial agreement is an agreement signed before marriage (or civil partnership), in which the couple agree how their assets will be distributed upon divorce, and whether any ongoing maintenance will be payable to one of the parties. It can also provide for the organisation of the parties’ finances during the marriage.

It is possible, alternatively, to enter into a similar agreement after marriage, called a post-nuptial agreement.

These agreements can give clarity to financial arrangements during the marriage and can make the divorce process more certain and straightforward. They can help to ringfence assets (for example inheritance, gifts received from family members, or assets built up prior to the marriage) to prevent them being shared with the other party on divorce and often lead to the less wealthy party receiving less on divorce than they might do without a pre-nuptial agreement.

Will the courts give effect to the terms of a pre-nuptial agreement upon divorce?

Pre-nuptial agreements are not strictly binding.  The English court will not automatically give effect to the terms of the agreement; it will always have the power to examine the parties’ divorce settlement and decide whether to make it binding.

If the court, on examining the settlement (based on the terms of a pre-nuptial agreement) is satisfied that certain criteria have been met, and that it is fair to hold the parties to it, it is likely to approve this settlement, which will then become binding.

However, if the court considers it would not be fair to hold the parties to the terms of the pre-nuptial agreement, it can refuse to give effect to such terms. For example:

• if the court considers that the terms of the agreement would leave one of the parties, or any children, in a position of need;
•  if it appears that a party did not have a good understanding of the consequences of the agreement, or their partner’s financial circumstances, when this was entered into; or
• if a party had signed the agreement under undue influence or pressure, for example if the pre-nuptial agreement was entered into immediately before the wedding day,

the court may refuse to endorse the agreement.

Even if the terms of the pre-nuptial agreement were not strictly upheld, the existence of a pre-nuptial agreement is still likely to have some effect on the ultimate settlement, and the court will usually give it some weight, even if it does not give effect to its entirety.

Recently, there appears to have been a move by the English courts to give increasing effect to pre-nuptial agreements, and it is possible that in the future pre-nuptial agreements will become binding. It is therefore important that parties entering into pre-nuptial agreements do so under the assumption that they are highly likely to be held to their terms if they were to divorce.

Can pre-nuptial agreements cover future assets?

Pre-nuptial agreements can provide for the treatment of future assets, and often cover future gifts, inheritance or future increases in the value of a business. However, in some instances provision for future assets may be less effective than provision for assets held at the time of the agreement. For example, if extremely valuable assets are built up during the marriage, beyond the contemplation of the parties at the time of entering into the pre-nuptial agreement, it could be argued that a party had not envisaged giving up such significant value at the time the agreement was entered into, so that it would no longer be fair to hold the parties to the strict terms of the agreement.

It is advisable, if there are significant changes in circumstances during a marriage, to update an existing pre-nuptial agreement so that these changes are taken into account.

Are foreign pre-nuptial agreements recognised in England and Wales?

Foreign pre-nuptial agreements will often be taken into account and given effect by the English courts, provided certain criteria are met. (Indeed, the fact that pre-nuptial agreements are commonplace and binding in some countries may be good evidence of the parties’ intention to be held to such agreements).  It is important that those with a foreign pre-nuptial agreement who are planning a move to the UK take legal advice on this, as it may be prudent to take certain steps to protect interests under English law.

It is essential that pre-nuptial agreements are carefully drafted and considered well ahead (i.e. some months ahead) of the planned wedding to ensure as far as possible that each party is given a proper opportunity to consider and negotiate the terms. Each party should take independent legal advice to understand the implications (specific to themselves) of entering into one; and ideally the agreement should be signed 28 days before the wedding, although an agreement signed late is better than no agreement.

If you would like to discuss pre-nuptial agreements further, please do not hesitate to contact Rhiannon Guibert: Rhiannon.guibert@smb.london