IFA 

Sharing the marriage spoils

Sharing the marriage spoils

The legal status of apre-nuptial agreement (PNA) and whether it is sensible for a client to enter into these agreements remains the subject of debate. 

A PNA is a contractual agreement entered into bythe parties to a marriage or civil partnership, which seeks to regulate the couples’ financial affairs during their relationship and in the event of that relationship breaking down. 

The agreement will usually cover assets acquired both before and during the relationship. Couples enter into PNAs for a variety of reasons including: 

  • To ensure, if possible, that their respective separate assets, which are usually what they bring into a marriage, remain theirs should the relationship fail, along with any assets that are given or left to them by their respective families during the course of the relationship.
  • To avoid or limit any dispute over the distribution of the family assets in the event of the relationship breaking down.

 

Is a PNA enforceable?

As the law presently stands in England and Wales, it is not possible to exclude the ultimate jurisdiction of the court upon a divorce to make whatever order it deems appropriate for the benefit of either party, although the case of Radmacher vs Granatino, which was heard by the Supreme Court in 2010, gives general guidance as to the extent to which a PNA should be taken into account. 

This case confirms that, while these agreements may not be “fully binding”, the weight to be given to them on divorce may now be substantial.

The wording of the court in this respect was that:

“The court should give effect to a [pre-] nuptial agreement that is fully entered into by each party with a full appreciation of its implications unless in the circumstances prevailing it would not be fair to hold a party to their agreement.” 

This means it can be argued that a PNA will be enforced unless there are substantial reasons for not enforcing it. At the very least, it may be given substantial weight when the court considers how to divide the assets on a divorce.

Key points

• A pre-nuptual agreement is a contract entered into by the parties in a marriage or civil partnership.

• The court is required to take into account numerous factors and issues on divorce, including income and earning capacity. 

• Pre-nuptial agreement, if entered into by the stronger economic party, may do a great deal of good.

The court is required to take into account numerous factors and issues on divorce. These include the parties’ income, earning capacity, property or other financial resources, as well as their financial needs, obligations and responsibilities of the standard of living enjoyed by both, their ages, the duration of the marriage, and their respective contributions, financial and otherwise. 

Crucially, the court must also consider whether it is appropriate for the family assets to be divided in equal shares, and over time it has become clear that the family assets are of different types; namely, matrimonial assets, which will usually be the assets that have been built up during the course of the marriage; and non-matrimonial assets, which either pre-date the marriage or come from a source outside the marriage, either by way of gift or inheritance. 

So it is important, in a divorce, to try to clarify which assets are matrimonial and which assets are not, and therefore likely to be divided in equal shares. This is where a pre-nuptial agreement can be of crucial importance.

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