Ok, first thing’s first, I know that this blog is long overdue. I’m going to try posting a little more often (strike that, a lot more often) but I thought I would get my swing back with something that hopefully many of you will find helpful and interesting.
I regularly decline to advise on pre-nuptial agreements. What’s that? A solicitor turning away work? Surely not! And didn’t I already write a blog about these in April last year? Let me explain.
Increasingly frequently I get a telephone call that goes a little like this:
“I have xxx assets that I want to protect. Don’t worry, I downloaded a pre-nutial agreement from the internet. I am very happy with it. It does say that we both need to get legal advice, which is a bit silly because it is in plain English so I understand it. If I bring in some folding money, can you sit down with me for a few minutes and go through it so that we can tick that box?”.
I then explain the perils of this approach and that the document may not be worth the paper it is printed on. I can’t in good conscience and won’t take their money just to read back to them a document they already understand, particularly when that probably isn’t going to do any good.
Let’s be honest: nobody goes into a marriage expecting that it is going to fail and with a bit of luck and a lot of hard work it won’t. However, for a lot of people, in the same way as they might make a will or take out life insurance, they will want to enter into a pre-nuptial agreement. Hopefully you will never need it but knowing that it is there can give you certainty and peace of mind. Also, if the worst does happen, it can protect your wealth and can prevent stressful and costly court proceedings at what will already be an incredibly difficult time. Imagine what a nasty surprise it would be if that document did not stand up to scrutiny when you needed it.
Let’s look at some of the common reasons why these DIY documents often don’t work and maybe you will see why it causes me such concern!
Since the landmark case of Radmacher and Granatino in 2010 the legal position is that the court will generally hold separating couples to a pre-nuptial agreement unless it is unfair to do so. Sounds good right? It can be but as with many things, the devil is in the detail.
Reasons why a court may choose not to uphold a pre-nuptial agreement can include:
Absence of full disclosure
You can’t know how fair a pre-nuptial agreement is unless you have a full and clear picture of your spouses assets. Have you provided full disclosure? Can you prove it if many years later relations with your spouse sour and their recollection differs from yours? If not you might be in trouble.
What pressures have been placed on your soon to be spouse? Are they unreasonable? How willing is your other half to enter into this agreement and again, can you prove it if problems arise letter
Lack of understanding
Does your soon to be spouse know what they are getting into with the pre-nuptial agreement? Do they fully understand it? Can you prove that? A lot of basic, “off the shelf” agreements try to cover this by recommending that both parties take legal advice, but if you separate and the pre-nuptial agreement is challenged then the quality of that advice may be called into question? £20 paid to your local high street solicitor to simply read a document back to you may not cut it when the chips are down.
Even if none of the above problems arise and the document has been properly drawn up, it is still in the court’s discretion whether to honour a pre-nuptial agreement if it is challenged. The court can choose not to follow it if it considers that it is unfair. A perfect example is the case of Luckwell and Limata this year. This is a case where the wife brought a little over £6 million into the marriage and the husband very little. The marriage lasted for about 8 years. There was a pre-nuptial agreement saying that the husband would receive nothing in the event of the breakdown of the marriage. In that case the court held that:
(i) Both parties agreed to the pre-nuptial agreement, without which the marriage would not have taken place
(ii) The husband (who was making the claim) fully understood the implications of the agreement
(iii) The husband had received full expert legal advice
(iv) There had been full disclosure
(v) There was no duress
It’s all looking pretty iron-clad right? Wrong. The court’s criticism of the agreement was that it made no provision at all for the husband, however long the marriage and whatever his circumstances and that was unfair.
The court awarded the husband £1.2 million, with about a third of that to be returned to the wife when their youngest child turned 22 and therefore he would not need so large a house.
What is the lesson to take from this? An agreement that provides something reasonable for your spouse, however limited, in the event of the breakdown of the marriage may be much smarter than one that says they get nothing. It might just be the difference between a fast, amicable separation and finding yourself in court racking up legal fees arguing over whether the pre-nuptial agreement should stand. If you do get to court, it might be the difference between the court upholding that agreement and not.
I have seen a real range of pre-nuptial agreements from the pretty good to the truly shocking, but you can’t tick all of those boxes (particularly the last one) without expert legal advice from the start. It isn’t just a case of filling out a pro-forma template. As awful as it sounds, there is a real art to drawing these things up properly.
The moral of the story? A £100 DIY pre-nup might just be the most expensive purchase that you will ever make. If you are looking to swap money for old rope then I’m not your man, but if you are planning your big day and you are looking for some peace of mind and to protect your wealth, give me a call and let’s talk about it.