A recent survey has revealed low interest in prenups, but for HNW couples they’re a must, writes Mark Harper
Many people have misconceptions about prenuptial agreements, believing that they are binding, or at the other extreme, not worth the paper they are written on. Commonly referred to as prenups, they are increasingly popular for couples who want certainty and peace of mind before tying the knot. If there is a significant wealth difference between them, it is a form of insurance in case things go wrong.
Both prenups and postnups have exactly the same effect; they specify how a couple’s assets should be divided in the event of their divorce, potentially protecting and preventing any attack on them, most especially where one party is much wealthier than the other.
Although they have received significant publicity, prenups are still not common practice. According to a Populus survey commissioned by Seddons, and published last week, polling 2000 adults in the UK, 95 per cent of married couples had never discussed drafting a prenup, while 38 per cent said that it had never even crossed their minds. Meanwhile, only 2 per cent had given the idea active consideration before eventually deciding against it.
This very low level of interest is unsurprising given the common misunderstandings of how important prenups can be, and their level of enforcement in English law. Campaigns are underway to take this further by reforming the divorce laws to include giving prenups statutory backing.
The above figures also reflect the delicacy of discussing the subject: even if a prenup enters the thoughts of one of both parties, they do not want to talk about it. For couples about to make a commitment, they pose the awkward question: is this marriage really for love? Prenups therefore come with an emotional health warning – the process can be very fraught, sometimes preventing a marriage from going ahead. After all, trying to strike the hardest bargain in negotiation may not be the best way to start off a marriage, especially if it reveals how money-focused a spouse might be. Meanwhile, negotiating a postnup also has the potential to trigger a divorce, so beware.
So are prenups and postnups legally binding and how can you get out of them? In some countries like Australia, New Zealand, and in most US states, they are pretty cast iron so long as they are correctly drawn up. This requires both parties to have separate legal representation, proper disclosure, no duress, and to know exactly what they are doing when they sign.
In England and Wales, the situation is more nuanced. For a long time prenups did not carry very much weight, until a change in the law in 2010. While a lot of weight is now attached to them, a court still has complete discretion to either adopt or dismiss the prenup. This depends firstly on whether the court is fully satisfied that everything was done properly at the time the agreement was signed under English law.
The court will also ask: is it fair? Which can mean: does this leave one of the parties destitute? If the answer is no, then it might well be okay, so long as there is also adequate provision for any children from the marriage. The key question then is which jurisdiction is the best to uphold or to get you out of it altogether?
What if you are a foreign national – how will the court treat your prenup or postnup? A foreign marriage contract may not hold up on divorce in an English court, even if it would be binding in their home country, depending upon the terms and where it was drafted. People who relocate to London with such a marriage contract almost certainly need to get advice on its enforceability.
This article is an extract from Hughes Fowler Carruthers’ Expert Guide to Divorce & Money