05/03/14 Law Commission Report - Pre-Nuptial Agreements

The Law Commission has published a long-awaited report making far-reaching recommendations for the future of divorce law in England and Wales.

The main recommendation in the Matrimonial Property Needs and Agreements report is that laws dealing with divorce should be amended to make pre-nuptial agreements legally binding. The Law Commission has prepared a draft Bill which will be presented to MPs to consider.

James Muir-Little, Partner and Head of Family Law at Canterbury-based law firm Furley Page, said he did not expect a pre-nup law to come into force until after the next General Election in May 2015. “I have long held the view that pre-nuptial agreements should be enforceable and that there should be a government website to enable people to work out their own divorce settlements, so I welcome these proposals,” he said.

If Parliament approves the Bill, married couples and those in civil partnerships will be able to make a binding pre-nuptial agreement prior to the wedding setting out how their assets should be divided in the event of a divorce. Such agreements will be upheld by the court to allow married couples ‘autonomy’ and control over how to split their assets.

The change in the law would also allow such binding agreements to be entered into after the marriage, known as post-nuptial agreements.

Naomi Hayward, a Solicitor in the Family Law team at Furley Page, said the aim of the Bill is to make both these types of agreement enforceable in court, unlike the present position where the court has a wider power to vary or overrule such agreements. The Bill proposes that in order to be legally binding, the nuptial agreements should meet the following criteria:

  • It should be made as a deed and correctly signed;
  • It should be made at least 28 days before the wedding or any time after the wedding;
  • The parties must undertake disclosure of all circumstances material to the consideration of the terms of the agreement;
  • It should be entered into after both parties have received legal advice from a lawyer and the parties should sign a statement confirming that they understand the agreement will be upheld by the court even if disputed in the future;
  • It should be valid and enforceable as a contract;
  • Any variation to the agreement should also follow the requirements above;
  • The agreement must make adequate provision for both parties’ needs and the needs of the children, otherwise the court can adjust agreement to ensure that both parties’ needs and those of the children are met.

Naomi said: “Many people view pre-nuptial agreements as only relevant to wealthy couples or celebrities but this is not the case. They can be made by anyone where there is an asset that they wish to protect in the event of a divorce.

“Some 42% of marriages will end in divorce so if you have, for example, inherited some money before or after your marriage, approval of this Bill would allow you and your spouse to enter into an agreement to protect this in the event of a divorce provided there were sufficient other assets to meet both parties’ needs. Equally, if you have received assets from a previous divorce that you wish to safeguard then a pre-nuptial agreement may help you do this.

“Reaching an agreement with your spouse when you still love each other could be the best way of protecting these assets on divorce and allowing you both to have autonomy and control over the finances on divorce without the need for lengthy and expensive legal battles.

“We have seen steps being taken towards the recognition of pre-nuptial agreements and with this general move towards enforcement, I hope that Parliament will agree that the Law Commission’s draft Bill should be made into law to provide the public and their lawyers with clear guidance and criteria for ensuring couples can decide for themselves a suitable outcome in the event of a divorce,” added Naomi.

The Report also makes other recommendations such as providing guidance as to the meaning of “financial needs” and the types of orders the court will be making with the aim of enabling couples to move to financial independence from one another.

The Law Commission also proposes that there should be a study into whether there can be a formula for calculating appropriate financial settlements for those couples that do not have nuptial agreements.

Naomi said: “Whether or not this would be in the form of a ‘financial settlement calculator’ is unclear, but the idea would be to see if a set formula could be applied to calculate such things as the amount of spousal maintenance that should be paid to enable couples to negotiate between themselves knowing that their discussions are within the parameters of the law.

“If this could be achieved then it would cut legal fees for couples facing a separation or divorce as there would be more clarity as to an appropriate settlement.”

For further information contact Naomi Hayward at Furley Page by email nfh@furleypage.co.uk, call 01227 763939 or visit www.furleypage.co.uk.

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