The importance of the pre-nup

For lots of couples the use of a pre-nuptial agreement (commonly referred to as a pre-nup) is there to protect assets and interests, should things go wrong in the marriage.

In the past, they have very much been thought of as the domain of the rich and famous but with blended families becoming more common, they too are becoming much more common.

If you want to protect your wealth ahead your wedding and you’re still contemplating whether you should have a pre-nuptial agreement, the recent case of MN v AN [2023] EWCH 613 MN v AN [2023] EWHC 613 (Fam) (10 March 2023) highlights the importance of having one in place.

The background to the case

The husband had assets of £32.5 million and the wife £62,000. Their pre-nuptial agreement in 2005 provided for the husband to pay the wife £500,000 for each year of marriage, capped at £12.5 million after 25 years and, after eight years or the birth of children if earlier, she was to receive 50% of the value of their London property.

In the alternative, she would receive a 50% share of any increase in the husband’s assets during the marriage, if greater, but capped at 42% of the husband’s total wealth. The husband was to pay all expenses relating to any children, which included maintenance of £60,000 per annum per child plus school fees.

At the time of the divorce in 2019, the husband relied upon the terms of the pre-nuptial agreement, which would provide the wife with a total of £11.75 million for her income and capital needs.

The wife argued that, as the pre-nup was executed five years before the definitive judgement in the case of Radmacher – Garantino, the pre-nup was invalid. She also argued that the husband had said there would be no marriage in the absence of the pre-nup that the agreement was vitiated. She sought £18.1 million of the total assets of £46.3 million and wished to remain in the family home with the children.

What was the outcome of the case?

The judge found that the parties had instructed excellent solicitors who took their roles seriously. The pre-nup could not simply be ignored save for terms to the wife’s benefit, as she wished. The terms were reasonable and the element of ‘sharing’ had not been ignored as the wife would have received half the marital acquest had that been greater. The pre-nup would have been ripped up after 25 years. There had been a full disclosure and the wife had not been under any ‘undue’ pressure. She had been advised to treat the pre-nup as binding and no vitiating factors led to a reduction in its weight.

The wife was therefore held to the pre-nuptial agreement. Her spending would have to reduce from the very high marital level and she was able to downsize in terms of her housing.

This case follows the decision in the case of Radmacher, and the judge also made it clear that anyone entering into a pre-nup must accept that they will be held to its terms in the absence of something pretty fundamental which vitiates the agreement. These agreements are intended to give certainty and those who sign up to them can’t then expect to be released simply because they don’t now like what they agreed to at the time.

What is the pre-nup situation here in the UK?

The UK has been slow to recognise the importance and validity of pre-nups and it was the landmark case of Radmacher v Granatino that highlighted this.

Radmacher and Granatino had entered into a pre-nup prior to their marriage agreeing that neither party would benefit from the property of the other, on divorce.

When the couple did divorce, the pre-nup was overturned by the judge, who awarded the husband a much larger settlement than was recorded in the pre-nup because, in her view, its importance had been lessened as the husband had not received appropriate legal advice before signing it and there were now children to take into account.

The wife appealed this decision and won.  The husband took the case to the Supreme Court but the decision was upheld and he was unsuccessful.  The judge ruled that pre-nups have ‘magnetic importance’ and appropriate weight should be given to the agreement IF entered freely entered into by both parties and who fully appreciate the implications of the agreement and potential outcomes.

Can a pre-nup be overturned in the UK?

The keyword in the above case review is “IF” the agreement has been entered into freely and knowledgeably.  If it can be proved that this is not the case, then there are grounds for the agreement to be overturned and it will not be considered binding if:

• Any subsequent children from the marriage are not provided for.
• The agreement was signed under pressure or there was undue influence or if one party did not have the legal capacity to enter into the pre-nup.
• It can be proven that one party did not fully understand what they were signing or what the implications to them would be if it was used.

What can be done to ensure a pre-nup is given maximum weight?

To limit the opportunities for the agreement to be reviewed or overturned it is advised that any pre-nuptial agreement be drawn up and entered into well in advance of the actual wedding to allow time for review, discussion and negotiation if appropriate.

Financial disclosure is also a prerequisite. Either party found to be failing to disclose their financial situation will mean the agreement is unlikely to be given maximum weight. Also, evidence of the parties having a full understanding of the financial position of the other party will help an agreement remain watertight.

If all of the above can be proven then a pre-nup, whilst still not technically legally binding, will stand up to scrutiny by a UK court and should be given decisive weight.

Who should get a pre or post-nuptial agreement?

• If you are engaged to be married or about to enter into a civil partnership and wish to have certainty regarding your financial matters in the event of your marriage/relationship breaking down, then you should have a pre-nuptial agreement.
• If you are already married/have entered a civil partnership and you would like to make arrangements to create certainty regarding your financial situation in the unfortunate event your marriage/relationship breaks down, you should have a post-nuptial agreement.
• If you have children from a previous marriage whom you wish to financially safeguard then, again, you should look to obtain a nuptial agreement.
• Finally, if you have significantly more wealth than your partner then, again, you may wish to enter into a nuptial agreement.

It’s always sensible to have a safety net in place which sets out clearly what should happen to your finances, in the event your relationship breaks down.

What happens during a divorce if the couple has a pre-nuptial agreement?

The court will consider whether to give effect to a pre-nuptial agreement if it is freely entered into by each party with a full appreciation of its implications.

The key question is fairness. To establish this, the court will query whether the agreement was entered into freely and if the parties were aware of the implications of the agreement. It must be fair to hold the parties to the agreement in the circumstances prevailing and this will include whether any children have been born.

What should someone do if they’re asked to sign a pre-nuptial agreement?

Always take legal advice. Find out more about our services and how we can help by visiting our pre & post-nup page. It is key that each party seeks separate legal advice.

How we can help you with a pre-nup

While it can be a challenge to broach the subject of a pre-nuptial agreement, and some may see it as an unnecessary expense, this recent case has once again highlighted that it certainly is an investment worth making.

Wherever you are on your journey, our pre and post-nuptial agreement specialists are here to answer any questions you might have. We will guide you through the process of drawing up an agreement for your particular circumstances, ensuring the outcome is right for you, your family and your future.

Get in touch with a member of our family law team today.