April 15, 2016

Why judges’ pre-nups guidelines need putting into context

By family law specialist, Norman Taylor

The statement of a panel of judges that says:  “for most people they will not be relevant on divorce” may be correct if the agreement is tested in a court, and the terms found to be unfair.

Pre-nups have risen in popularity and influence since a 2010 UK Supreme Court ruling recommended that, although not legally binding, courts should uphold carefully thought through agreements drawn up well in advance of the marriage and without coercion. Of course, they have to be fair, and meet the respective needs of the parties. However, the determination of what is “fair” and what are the “needs” will be looked at in the light of the pre-nup terms.

The Family Justice Council guide, drawn up by a group that includes five judges and barristers, claims that pre-nups will be ‘irrelevant’ for most people undergoing a divorce – and that most courts will ignore them when they dividing up assets, basing their decisions on ‘fairness’ instead.

The guide also adds that, in the eyes of the court, “meeting needs is the central factor on divorce” and only the very wealthy – who have more assets than their former spouse could ever need – can benefit from an agreement.

The judges’ claims are based on the assumption that a pre-nup will be challenged, and indeed the Guide is aimed at people who represent themselves at Court. However, the whole point of the pre-nup is to agree things in advance in order to avoid the trauma, cost, and uncertainty of court proceedings.

If one partner does challenge the agreement, the court may have to make a decision. However, if needs are addressed and both parties deem the contract to be fair, the court will more than likely to uphold it.

The recent increasing influence that pre-nups have on courts suggests that the courts will take them very seriously into account in determining fairness and needs, and seek to ensure that these lie at the heart of the terms of such contracts. It is thought that a court is likely to follow a properly constructed pre-nup even if the terms are not precisely what the court might otherwise have ordered.

Originally drawn up to set out how a couple’s assets will be split if the marriage fails, the contracts can also address vital issues such as child residence and contact arrangements, occupation of homes on separation, interim support at the time of separation, and provision for each of the parties on the death of either or both of them.

We have witnessed the positive impacts of pre-nups which give comfort in cases where the wealthier spouse agrees to provide for the other spouse in the event of a split. Also, some couples embarking on marriage for the second time are keen to go down the pre-nup route to ensure that certain assets are preserved for their children from previous relationships – whilst others seek to protect wealth which may have been in their family for generations.

Addressing anticipated needs and reasonable requirements of both parties should always be a first priority for practitioners drafting prenuptial agreements. It is likewise understandable that a seismic change in circumstance may well influence a decision of the courts. Therefore, it is prudent that a pre-nup contains provisions to review the agreed terms in the event of a material change in circumstances. Ultimately, skilfully drafted and fair prenup’s appear to be welcomed by the courts.

Circumstances where the contracts run into problems include if judges are concerned that they are signed under pressure. They will want to know that the partner with the most to lose understood the agreement, that there was no pressure to sign and that there was independent legal advice. If there was little time to reflect on or be confident about the terms, judges may ignore or vary them.

To avoid these risks, set up the agreement at least 21 days before the wedding, make full financial disclosure and secure good legal advice. If respected family lawyers help draw up the agreement, judges can be confident that both parties understood it fully and were not rushed into it.

If you have any comments, queries or concerns on pre-nups, mediation or divorce related issues, leave a comment below, call the Jones Myers team on 0113 246 0055 or tweet us on @helpwithdivorce.