Meredith Lawton, solicitor in the Family Law team at the international law firm Broadfield, looks at the role of pre-nups, the case of Standish v Standish, and the functions of pre-nups in financial planning.
Pre-nuptial agreements, or ‘pre-nups’, are increasingly common in England and Wales, especially for couples wanting to clarify how their assets will be divided if the marriage ends.
Once viewed with scepticism, the drafting of a pre-nup before marriage (or post-nup after marriage) is now seen as a pragmatic approach to marriage, as well as an important financial planning and risk management tool. The recent Supreme Court case of Standish v Standish [2024] highlights their importance, showing how a pre-nup could have prevented a lengthy and costly legal dispute.
Legal Status of Pre-Nup Agreements in England and Wales
Unlike some jurisdictions where pre-nuptial agreements are automatically binding, English Law has traditionally treated them with caution. However, the 2010 Supreme Court decision in Radmacher v Granatino marked a significant shift. Courts are now more likely to uphold pre-nups if the following criteria outlined in Radmacher is met.
Voluntary. The agreement must be entered into voluntarily by both parties, without coercion, pressure, or undue influence. The court will examine the circumstances to ensure both parties had the freedom to make an informed decision.
Disclosure. Full and frank disclosure of assets and financial circumstances is essential. Both parties must provide comprehensive information about their finances, including income, assets, liabilities, and other relevant interests. This ensures each party is fully aware of the other’s financial position before entering into the agreement. Failure to disclose material information can result in the agreement being set aside.
Fairness. The principle of fairness is central to the court’s assessment of pre-nuptial agreements. The agreement must be fair at the time it was made and remain fair if circumstances change. The court will consider whether the terms are just and equitable, taking into account the duration of the marriage, the needs of any children, and the contributions of each party. An agreement that leaves one party at a significant disadvantage is unlikely to be upheld.
Timing and Legal Advice. The agreement should be signed well before the wedding (ideally at least 28 days prior) to avoid claims of pressure. Each party should also get independent legal advice to ensure they fully understand the terms.
The Significance of Standish v Standish [2024]
The case of Standish v Standish is a landmark Supreme Court case relating to the definition of marital property. The husband had a highly successful career in the financial services industry and generated most of his significant asset base prior to the parties’ relationship. Up until 2017, all the husband’s wealth, aside from two joint bank accounts and the former matrimonial home, was held in his sole name. In 2017, the husband transferred around £80 million to the wife as part of a tax planning arrangement. The intention, agreed by both parties, was that the wife would settle these assets into a trust. However, the wife did not do so. Instead, she retained the assets in her own name and, in April 2020, initiated divorce proceedings.
A pre-nuptial or post-nuptial agreement could have provided significant benefits to both parties. It would have allowed the parties to specify which assets were to be considered non-matrimonial (i.e., acquired before the marriage or from external sources) and which were to be treated as matrimonial property, subject to division upon divorce. The husband’s substantial pre-marital wealth could have been expressly ring-fenced, reducing the scope for dispute over whether these assets should be shared. Whilst the wife, as a homemaker, could have negotiated for appropriate financial provision in the event of divorce, ensuring her needs and those of the children were met, whilst still respecting the husband’s pre-marital wealth.
Further, by setting out in advance how assets would be divided, a pre-nuptial agreement would have provided both parties with greater certainty and predictability, reducing the scope for costly and protracted litigation.
The Role of Pre-Nups in Financial Planning
Pre-nuptial agreements serve several important functions in financial planning:
- Asset Protection: Individuals with significant personal or family wealth, business interests or inheritances can use pre-nups to ring-fence certain assets, providing clarity and security.
- Debt Management: Pre-nups can specify how existing debts will be handled, protecting one party from the other’s financial liabilities.
- Clarity and Certainty: By setting out how assets will be divided in the event of a divorce, pre-nups reduce uncertainty and the potential for costly, acrimonious disputes.
- Safeguarding Children’s Interests: Those with children from previous relationships can use pre-nups to ensure that certain assets are preserved for their children from a previous relationship.
- International Considerations: For couples with connections to other jurisdictions, pre-nups can help manage the complexities of cross-border assets and differing legal systems.
While pre-nuptial agreements are not automatically binding in England and Wales, valid pre-nuptial agreements are increasingly relied upon to exclude claims to share in matrimonial assets. As a financial planning tool, pre-nups offer clarity, protection, and peace of mind for couples, and could have greatly benefited Mr and Mrs Standish to avoid costly and acrimonious litigation.
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