Future-Proofing Your Marriage – a Guide to Pre-Nups
Understanding how English divorce law works may not be the most romantic thing to be learning about just as you are contemplating marrying the love of your life, but if you are considering entering into a pre marital agreement (PMA) then you are realistic enough to know that not all marriages last, and understanding and making provision for what might happen in the sad event that your marriage breaks down is, for many people, something which provides them with peace of mind and, perhaps counter-intuitively, means the marriage is more likely to last.
Most people do not realise that when they get married they acquire various rights against and responsibilities for their new spouse under the law – as prescribed by the Matrimonial Causes Act 1973 (or the Civil Partnership Act 2004 for civil partnerships). While you are happily married these rights, or Claims as they shall be referred to here, don’t have much significance, but when you divorce, they mean that you are both entitled to make Claims against each other relating to the property, capital, income and pensions which have built up and become marital assets during the course of your marriage.
The Court’s Approach to Marital Assets
Marital assets tend to be those assets which have built up during the course of the marriage. For a young couple just starting out with not much but their jobs and maybe a small amount of savings, that’s going to be just about everything. One half of the couple may earn more than the other; when children come along one half of the couple may stay at home to look after them. In the event that such a marriage broke down a court would say that they had made equal contributions to the marriage and the starting point for dividing their finances would be 50/50. This is because in considering the contributions each person has made, the court will consider all types of contribution, not just financial, and will not give more weight to financial contributions than other kinds. So going out and earning all the money is not “worth” more in the court’s eyes than staying at home with the children and doesn’t entitle you to a larger share, because the court would say that you would not have been able to earn all the money without the support of your partner. There would not usually be a departure from equal sharing in that kind of situation unless there were exceptional circumstances. In the scenario of a young couple who had started out together with not very much at all, an equal sharing would be the right outcome for determining how their claims against each other should be settled. It would not be fair for one of them to walk away with a lot more than the other when their joint wealth was a result of their joint endeavours, whatever the nature of those endeavours may be.
For a lot of people getting married though, this scenario is not theirs. They may have decided to marry later in life, having already established a lucrative career. It may be a second marriage, and they already have significant assets from a previous relationship. They may have inherited significant wealth prior to the marriage, or may have expectations of a significant inheritance in the not too distant future.
If those assets are brought into a marriage and used for marital purposes (for example to purchase a new family home) then it is likely that on a marriage breakdown, a court would consider those assets as “marital” and include them in the joint “pot” available for division between the couple, regardless of, or having very little regard to, where they came from. This is more likely to be the case the longer the marriage continues, as over time the boundaries around assets blur as they mingle with other assets – much like the individual ingredients in a pot of soup. Many people consider this treatment of assets unfair, especially if one person has brought a lot more assets from outside sources into the marriage than the other.
The courts are willing to consider the source of assets and will in some circumstances “ring fence” them, but much depends on how the assets have been treated during the marriage and whether the needs of the other person can be met without taking those assets into account.
So if you have brought significant assets into a marriage, how can you ensure that you keep them, and they don’t end up in the “marital soup pot”, in the event that the marriage breaks down?
The answer is to enter into an agreement, before the marriage (although it can be done after) setting out what you consider to be “separate property”, that is property which is not to be included as an ingredient in the marital soup pot, and so not to be shared with your spouse on the breakdown of the marriage. The agreement can also consider how joint, or marital (“soup”), property should be divided in the event that the marriage ends.
It is important to understand that such agreements are not binding under English law (unlike in the USA and some European countries). In England it is not possible to “oust the jurisdiction of the court”, which is a legal way of saying that the courts have the last word in deciding how assets are to be divided, so if they don’t like what you have agreed between you, they won’t sanction it. However as a matter of public policy the courts are keen to uphold agreements where possible, but that agreement must still be fair over all.
How to have the best chance of ensuring your agreement is fair
There are several basic things you can do to help the courts find your agreement fair. You can ensure that
- Your agreement is signed by you both at least 21 days before the wedding, so that no one feels under any pressure to sign it, and you can ratify it after the wedding
- You both have legal advice on the agreement, what the clauses mean and the effect of signing it
- You both disclose full details of your assets, income, pensions and liabilities so that you each understand what you are giving up the right to claim on in the event of the marriage breaking down. If you don’t disclose all assets it will be much more difficult to claim them as “separate” on marriage breakdown
- The needs of the person who has less financially are properly provided for so they are not left with nothing at all
- There is adequate provision for the agreement to be reviewed in particular circumstances (such as birth of a child, the inability of one person to work for medical reasons, or the passage of time) so that the agreement is kept current and relevant to your particular circumstances
What Considerations are taken into account?
If you have children under 18, their welfare is given paramount consideration. If the person who has less financially is their mother, provision may need to be made for her so that she can house them and look after them properly. That provision may only last until they are adults but it could continue beyond then. If the marriage has lasted a long time and one of you has given up career opportunities to look after children, that is also something that should be considered, particularly on any review of the agreement on the birth of a child.
The various factors the court takes into account are set out in the appendix to this leaflet.
Because each situation is different it is impossible to set out all the possible permutations here. You need to consider your own circumstances and those of your partner, and take legal advice on what the agreement should cover.