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Why prenups are taken more seriously

  • Describe the significance of the Radmacher case on prenups
  • Explain the significance of prenups
  • Describe why more people are using them
CPD
Approx.30min
Why prenups are taken more seriously

It is now 10 years since the UK Supreme Court gave its judgment in Radmacher v Granatino [2010] UKSC 42 on the use and effect of prenuptial (premarital) contracts. 

That decision brought about a seismic shift in the way that prenuptial agreements operate and are viewed in England and Wales and it is one that all financial advisers, as well as family lawyers, should be familiar with.

Background

Earlier it is fair to say that there was pretty limited support for prenuptial agreements (prenups) here and their use was largely confined to international marriages between a UK and non-UK national. 

In many European jurisdictions, not to mention most of the States in the US, they were used more commonly where the parties were about to marry because they were, and continue to be considered, determinative. 

In England and Wales, however, prior to Radmacher while a judge would look at the terms of a prenup, it would be regarded as one of the factors to be taken into account when determining the case. 

In general terms, the advice given to a couple before signing was that it would provide a good record of the parties’ respective finances and their intentions, but little more than that. 

The Radmacher judgment shifted the position because it said that the parties will be held to their bargain in the event of a divorce, where the prenuptial agreement “was freely entered into by each party with a full appreciation of its implications, unless in the circumstances prevailing it would not be fair to hold the parties to their agreement”.

This falls short of a situation whereby prenups are automatically enforceable but is still a hugely important judgment nevertheless.

Growth of prenups

As there is no requirement to register or enrol a prenuptial agreement with the court, it is difficult to say with any accuracy just how much their use has increased in the last 10 years. 

Most family lawyers will agree that their use has proliferated, not just among the super-wealthy but by a growing number of couples wanting greater autonomy and more choice as to the arrangements which should prevail upon a division of their finances in the event of a divorce.

What is fascinating is the variety of approaches that the parties take on the subject: some go beyond what a court would do and would see as fair when dividing up the family wealth, whereas others want to keep everything entirely separate and apart now and for always and seem unable to contemplate what effect such an arrangement might have on any children who arrive and who will live ordinarily between the respective households of their divorced parents.

What are the limits of prenup terms?

So just how far can a prenuptial agreement go in moving the needle away from what a court would award, in terms of capital and income provision, on divorce? The answer is: quite some way.