Are-Nuptial Agreements are made by couples before they actually get married, setting out the arrangements for that marriage and, in particular, what they would like to happen should they separate. Generally they deal with financial issues and how their assets will be divided should they get divorced.
Pre-nups are most common where one party has substantially more assets than the other. It might be a farm or some other family business or inherited wealth. If the business or farm has been in one party’s family for generations, it is fairly understandable that they would not like it sold or partitioned on divorce.
The situation at the moment is that provided all the necessary steps are met, then should the parties divorce, the Court will look at the pre-nuptial agreement and take it into consideration when deciding what should happen to the parties’ assets. The point is though, that they are not binding. The parties cannot guarantee that what they set out will actually happen. This is largely because you are obviously making a pre-nup agreement at a particular stage of your life and if the parties come to divorce, circumstances will have changed. Initially they might both have been working and financially independent but after many years, one party may have given up work to look after children and would be in a weaker position should they have to return to employment, plus of course there are the children’s needs to consider.
At the end of February the Law Commission announced its proposals to enshrine Pre-Nuptial Agreements in law, increasing certainty for separating couples and potentially reducing long and expensive court battles. The Law Commission’s report, which follows three years of consultation, includes a draft bill which, if it comes into law, would for the first time allow couples to make legally binding agreements about the disposal of their assets in the event of their separation. It proposes new legislation to make qualifying Pre-Nuptial Agreements binding.
In order to qualify, an agreement made either pre or post-nuptially must:-
- Meet the usual contractual criteria which includes evidence that there is no undue influence or misrepresentation or fraud.
- Be signed no less than 28 days before the wedding and contain a statement that the couple understand the agreement is a qualifying nuptial agreement that will partially remove the Court’s discretion to make financial Orders.
- Both parties must have had legal advice and have made full disclosure of their financial assets.
Provided that such a qualifying pre-nuptial agreement provides for the needs of the parties and any children, it will be binding and the Court will have no discretion to make an Order different from its terms. This is a really fundamental change.
However, it is ironic that in the same week as this announcement, the High Court has ordered that estranged husband Frankie Limata was entitled to about £1.2m from his wife Victoria Luckwell, despite the couple having signed a Pre-Nuptial Agreement in July 2005 that he would not make any claim against her estate. Victoria’s father is Mike Luckwell who was the director of the media company that created the children’s programme “Bob the Builder” and is estimated to have a £135m fortune.
Despite the pre-marital agreement that the husband would not make claims against family assets, the Judge, Mr Justice Holman, ruled that proper provision must be made for Limata, despite the agreements, in order to avoid the divorce having a damaging impact on the couple’s three children. His reasoning was that the children could find themselves living with their mother in relative luxury then staying with their father who was in debt and lacked assets, in relative poverty. The couple have three children and the husband has no assets at all. The Judge ruled that Victoria Luckwell must fund a house or flat for the use of Limata, not exceeding £900k. When their youngest child reaches the age of 22, that property must be sold, unless the Court amends the order. 45% of the net proceeds of sale must go to Luckwell and the balance reinvested in a home for Limata to use for the rest of his life. The net result of the Judgment is that Ms Luckwell will have to sell the £6.7m house she lives in.
So the question remains: are Pre-Nuptial Agreements legal or not? Whilst they can be very useful in setting out parameters should a couple’s relationship fail, at the moment they are no guarantee of certainty.