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Report on pre-nuptial agreements

On 27 February 2014, the Law Commission delivered its long-awaited report on pre-nuptial agreements. The Commission recommends that the agreements should be given legal standing which the majority of family law practitioners believe represents a welcome step towards providing couples with greater autonomy and certainty to regulate their financial affairs in the event that their marriage breaks down. For a large proportion of the population, pre-nuptial agreements are not necessary as there is not enough wealth to enable certain assets to be ring-fenced. They do, however, have a role to play where there is significant wealth on one side or where there are inherited, family business or trust assets to protect.

The report recommends that pre-nuptial agreements be legally binding where independent legal advice is taken by both parties, full financial disclosure has been provided and both parties' financial needs are met. These factors are already considered to be necessary to give pre-nuptial agreements the best chance of being upheld by the Courts under the current law. The way in which agreements are prepared is therefore unlikely to change materially.The report also recommends that pre-nuptial agreements should be entered into 28 days before a marriage.

Even if the recommendations are adopted, arguments about enforceability are likely to continue. There have been a number of reported cases in the High Court recently where one spouse has sought to depart from the terms of a pre-nuptial agreement. For example, in AH v PH [12 December 2013], a pre-nuptial agreement was entered into to try to protect the husband's inherited wealth. Moor J concluded that the wife did not fully appreciate the implications of the agreement and so the parties could not be held to its terms, particularly as certain key clauses were missing from the agreement, no financial disclosure had been made and no independent legal advice from practitioners in this jurisdiction had been obtained. In the case of Luckwell v Limata [28 February 2014], the High Court set aside a pre-nuptial agreement and two post-nuptial agreements made between a wealthy heiress and her husband. The Court held that the agreement would have left the couple's three children in a "damaging situation" because the husband would not have an adequate home in which the children could visit him and stay.

Whilst it is likely to become more difficult for spouses to seek to depart from the terms of pre-nuptial agreements if the recommendations are introduced, undoubtedly there will still be scope for arguments about an agreement's failure adequately to meet the financial needs of one party.

This article was written by Katie O'Callaghan, a solicitor in the Family department

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