A Quick Guide to Premarital Agreements

What is a Premarital Agreement?

A Premarital Agreement (PMA) is a written agreement entered into by a couple prior to their marriage or civil partnership. The agreement establishes what the couple would like to happen to their assets and income in the event that their marriage or civil partnership breaks down. If a PMA is not drafted and the marriage or civil partnership does, in fact, break down, the Court has total discretion as to financial provision, i.e. the division of the couple’s assets and income. In most cases, financial provision will be the core focus of the PMA, however, the agreement can cover other aspects too, such as provision for death by way of will – a solicitor can advise on what is reasonable and likely to be upheld by a Court.

When should a Premarital Agreement be drafted?

We recommend that a PMA is drafted in the following circumstances:

1. The parties’ wealth is unequal
2. One of the parties’ is remarrying for a second or third time and especially if there are children from a previous relationship
3. There are potential future assets by way of gift or inheritance expected
4. One of the parties’ has outstanding debt(s)

Benefits of a Premarital Agreement?

A PMA can be used as a practical financial planning tool if the marriage or civil partnership was to break down. The costs involved in a divorce or separation could be reduced, as the apportionment of assets and income would have already been agreed, in accordance with the PMA, saving what is often a long, drawn out and costly exercise.

A PMA can also be very effective in situations where a couple is well-known in the media or, of a high profile. If a “confidentiality clause” is drafted into the agreement, the couple’s divorce and finance matters could remain private.

A PMA can also provide for the parties’ to ring-fence the assets they have accumulated before the marriage. This is particularly useful where one party has significant assets in comparison to the other.

Each PMA is drafted according to the parties’ specific circumstances and can reflect the needs of the parties’ involved.

Are Premarital Agreements legally binding?

PMA’s are not currently binding in England Wales. However, the case of Radmacher v Granatino held that PMA’s should be taken into account if they are drafted correctly, therefore, they are persuasive and can be fully taken into account if they are fair. The Courts will generally uphold the terms of a PMA provided the following criteria are met:

• Both parties have sought independent legal advice
• There is full disclosure of assets and liabilities
• There are no unforeseen circumstances after that would make the agreement unfair to uphold
• The agreement provides for the needs of the financially weaker party
• There is no undue influence or duress
• The PMA must be finalised and signed by the parties’ at least 3 weeks before the date of the marriage or civil partnership

A Court can uphold the whole of a PMA, part of a PMA or disregard it.

What does the Court mean by “fairness” and “equality”?

The overall aim of the Court is to achieve fairness for both parties’ – the Court is guided by the “yardstick of equality”, i.e. equal sharing of all income and assets 50/50, and the Court will not depart from a fair and equal outcome unless there is a good reason.

A PMA should be reviewed periodically, in order for it to be considered whether the agreement is still “fair”. It is unlikely that the PMA will remain “fair” if there has been a significant change in circumstances, e.g. one party becomes unemployed, children are born into the marriage or, one party becomes unwell. A “review clause” can be drafted into the agreement, which allows the agreement to be reviewed, for example, every 5 years or so.

When will a Premarital Agreement become effective?

A PMA will become effective upon the parties’ marriage or civil partnership.

Will a Premarital Agreement be valid in another country?

If the parties’ were to relocate abroad, it is essential that advice is sought as to the enforceability of the PMA in that new country – a PMA might not always be upheld. A “jurisdiction clause” can be included within a PMA to affirm where the parties’ intend for the PMA to be enforceable.

We recommend that parties’ start discussions about a potential PMA well in advance of the marriage or civil partnership, to allow for enough time to negotiate, collate the agreement and sign. For more information on Premarital Agreements please our family law team on 0330 822 3451 or request one of the team to call you back online.