Chrissy’s Family Law Corner

Dear Chrissy,
My daughter Sophia is engaged to a primary school teacher Michael, and they are to be married next year.
My husband and I have some concerns if their marriage were to break down in the future. Sophia is a property owner – she has a house in Southgate and a flat in Cyprus. She runs her own very successful beauty business which she has been building up for many years and it looks like she might be signing a lucrative deal with a major retailer in the not-so-distant future.
As our only child, she will be set to inherit two properties from my husband and I later down the line. Michael comes from a much more modest background. As Sophia is the financially stronger party in the relationship, my husband says they should get a prenup. I have heard people talking about prenups on tv but I’m not too sure how it all works. I have a couple of questions before I broach the topic with my daughter.
1) What exactly is a prenup and should Sophia get one?
2) Is it legally binding?
Thank you!
Eleni

Dear Eleni,
Thank you for your letter. I can understand why you and your husband have some concerns and your questions are very common ones. I will look at each of them in turn.

What exactly is a prenup?
A prenuptial agreement (often referred to as a prenup) is a contract entered into between two people before they marry. It basically records the ownership of assets e.g., money and property, and details what they intend to happen to these assets should the marriage break down and end in divorce. In the simplest of terms, a prenup sets out what would happen financially if the marriage fails and basically dictates “who gets what.”

Why should Sophia get one?
On divorce, the starting point is a 50:50 division of marital assets. What defines a “marital asset” on divorce can become unclear over time. Without a prenup, any assets Sophia formally owns herself may become “matrimonial assets” once she gets married (depending on decisions made at that time), or as time goes on, depending on how they are used. Whilst pre-acquired assets should be ring-fenced, they may end up being merged with “marital assets” either due to decisions made or because they are “needed” on a divorce. So should their marriage end in divorce, both of them may then have a claim on these assets. What a prenup does, is to allow Sophia to ring-fence certain assets to protect them from this eventuality – and these assets don’t have to have a high financial value or even be in her possession at the time of signing the prenup. The prenup still has to be “fair” to give it the best chance of being upheld. They are tricky documents and specialist advice is crucial.
There are many reasons to consider getting a prenup. I will go through a couple of the most popular motivations for doing so that may apply to Sophia:
1. The most common reason for signing a prenup is when one partner is bringing significantly more wealth or assets into the marriage than the other. In Sophia and Michael’s case, there is an existing disparity in wealth between them. What this may mean for Sophia as the wealthier spouse is that she may stand to be disproportionately affected by a divorce in which the court may look to her pre-acquired assets if there is a “need” to do so. A prenup will allow her to ring-fence and so safeguard these assets, which as you say she has been building up for years. However, this must always be drafted against the test of fairness so that ring-fencing everything would not work if it meant Michael’s financial needs are not met and therefore the document is unfair. They may have to be met from pre-acquired assets if the parties have not built up any joint marital assets during the marriage. This applies to capital and income potentially.
2. Another common reason, and one relevant to Sophia, is that there is a business to protect. Assets obviously don’t just come in the form of money, investments, property and other financial forms – if one partner entering into a marriage is a business owner, then their business also counts as a significant asset that a marriage and is something that subsequent divorce could affect. A prenup that places the business outside of the pot of shared marriage assets is worth considering.
4. Another reason to consider a prenup is if there is an inheritance to protect. A prenup can safeguard the future inheritance that Sophia is expected to receive. A prenup can also protect an existing sum of money or assets intended to be passed on as inheritance to someone else e.g. a child.

Are prenups legally binding?
This is a good question. It is very important to note that while prenups are legal documents that will be considered by the Courts when prepared correctly, there is a possibility that the Court may, depending on the facts of a particular case, choose to divide a couple’s assets in a manner that differs from the prenup. i.e., it may not be binding.
In deciding whether to uphold an agreement, the Court will start from the position that where a couple have entered into a prenup, aware of what they were doing, and understanding the financial consequences, they should be held to the terms of their agreement unless the result of doing so would be to place one of them in a position of financial hardship and would be unfair. Essentially this means the Court will look at the prenup in the context of the circumstances in which it was made and the effect of holding the couple to the terms of the prenup at the point the relationship breaks down. There may well be a considerable gap between these two points in time.
In Sophia’s case, to improve the prospect that the court will uphold the prenup it would want to see that:
– both Sophia and Michael had sufficient information to make an informed decision whether to enter into the agreement, with a full understanding of its implications with no evidence of any fraud or misrepresentation by anyone in relation to the agreement.
– It must be accompanied by a summary of both their current and estimated future assets.
– the prenup is “fair”. For example, does the agreement provide for Michael’s basic reasonable needs to be met in the event of a divorce? A prenup providing for nothing for Michael will not stand up to scrutiny unless he had significant wealth too.
– Michael was not pressurised into the agreement. As such, we would advise Sophia that it is good practice to finalise the agreement in good time before the wedding (ideally a minimum of 21 days prior to the ceremony), so that Michael does not feel undue pressure to agree to anything and has time to consider it. Also, from a practical perspective, it can take time to deal with financial disclosure, negotiations and legal advice, so it is important to plan in advance. As there is flat in Cyprus, then additional time will be needed as we would always say that a specialist family lawyer should be instructed to advise on the need for and effect of such an agreement in that country. In short, presenting a prenup to your partner on the eve of the wedding and telling him or her “sign here dear or the wedding is off” is understandably not an option!!

Given the undue pressure point, it makes it even more important that Michael should take independent legal advice on the agreement and its effects. It is usual for Sophia as the person/family wanting the prenup to pay for Michael’s fees – this also encourages him to go to a decent lawyer, which helps her because it makes it harder for him to then say he didn’t know what he was signing.
If it is properly drafted it can be very persuasive to a judge if Michael decides to question the agreement later. Our job as a lawyer is to make it as difficult as possible for the other party to succeed by giving the document significant weight. To do so, they take finessed drafting, are often detailed and lengthy documents.
You might ask, is it worth Sophia entering into a prenup given it may not be binding? The answer is yes. Whilst it is not the most romantic notion, it will give her security and clarity and if the procedure is followed correctly and all the points I have just discussed are considered and followed, it is likely to be fair and upheld by the court.

Christina is an experienced Family Lawyer at Collyer Bristow advising on all areas of relationship breakdown including divorce and separation, children issues, cohabitation disputes, nuptial agreements and financial claims. She has particular expertise in dealing with complex private law children cases, often with an international and religious dimension. The financial dispute cases that Christina works on tend to be high value and often also have an international dimension with trust interests or complex corporate structures.
Christina read Philosophy and Theology at Oxford University and before joining Collyer Bristow, Christina worked in Banking and Finance at DWF.

If you would like to contact Christina, please do so at [email protected]