For Richer or Poorer?

Pre-nuptial or pre-marital agreements have hit the headlines recently in the high profile case of Radmacher v Granatino. They are not as yet strictly enforceable under our law but this important case provided a sharp and hefty nudge in this general direction.

At first glance, the facts of Radmacher do not seem necessarily relevant to the general public but in October this year the Supreme Court upheld the Court of Appeal’s decision. The court held Mr Granatino to the pre-marital agreement that he had signed in Germany and awarded him a reduced lump sum to provide him with an income stream of approximately £1 million over a 15 year period. In addition, Mr Granatino was only left with use of a £2.5 million housing fund until their youngest daughter reached the age of 22 at which point the capital provision had to revert back to the wife.

This type of financial landscape is far from typical, but this said, this important case has helped to strengthen the usefulness and effect of pre-marital agreements in circumstances where relationships sadly come to an end. There is now a presumption that the parties entering into a pre-marital agreement will intend that it shall be binding upon them both unless there are complicating deficiencies as outlined below.

In Radmacher the Supreme Court indicated that a court should enforce a pre-marital agreement provided it has been entered into by both parties:

a. without duress,
b. voluntarily, and
c. fully appreciating its implications. 

The court must also be satisfied in its overall exercise of powers that there are no reasons to suggest that it would be unfair to hold either party to the agreement. A pre-marital agreement, to increase the chances of the terms being enforced, must always ensure that the reasonable needs of both parties and any dependent children are fully met.

Ideally both parties should have a full understanding of the other’s financial circumstances and have received competent legal advice but Radmacher makes it clear that this is not absolutely essential.

It seems likely that to maximise the chances of a pre-marital agreement being enforced that the following pre-conditions must be satisfied:

a. total transparency regarding financial disclosure to ensure that both parties  sign the agreement with their eyes wide open.  

b.both parties are legally represented and confirm in writing that they have either received or have had the opportunity of receiving independent legal advice on the terms and implications of the agreement.  

c. the parties have ample time in which to disclose their financial positions, reflect upon the proposed agreement and take independent legal advice – ideally no agreement should be signed within 21 days of the parties’ intended date of marriage.

d. the agreement should make sufficient provision to adequately meet the reasonable income and capital needs of the parties and any relevant child or future child.

e. provision should be made within the agreement to sign a further agreement after the marriage repeating the terms of the pre-marital agreement.

Pre-marital agreements now have significantly greater weight in this country by reason of the Supreme Court’s recent decision. At Dunn & Baker we have certainly experienced a greater interest and demand for such agreements and this seems increasingly likely to continue. It is certainly advisable to obtain sound advice if you are contemplating marriage and wish to take reasonable steps to protect your financial position upon relationship breakdown. The preparation of a pre-marital agreement can help remove or at the very least reduce the uncertainty and stress of separation.

For further information or advice please contact a member of our team on Exeter 01392 285000 or Cullompton 01884 33818.