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Law Commission prenups report is welcome but will change little, says Boodle Hatfield

The Law Commission has today (27 February 2014) delivered its long-awaited report on prenuptial agreements.

The Commission recommends that prenups are given legal standing which, family law firm Boodle Hatfield says, represents a welcome step towards providing couples with greater autonomy and certainty to regulate their financial affairs in the event of marriage breakdown. However, if the recommendation is adopted by the Government it would not, says Boodle Hatfield, materially change the way prenups are used and there would continue to be arguments over their enforceability.

The report recommends that prenups 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.

Katie O'Callaghan, a solicitor in the Family team at law firm Boodle Hatfield said: "These are factors that are already required to give prenups the best chance of being upheld by the Courts. The way law firms prepare prenups will not materially change.

"For the majority of the population prenups are simply 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 or trust assets to protect."

Katie continues: "If the recommendations are adopted we would expect to see arguments focus on the enforceability of prenups, as the concept of 'need' is sufficiently subjective. In a lot of cases, there is likely to be litigation at the time of divorce about the agreement's failure to meet the financial needs of one party."

The Law Commission has also examined the inconsistencies in the way the Courts across the country approach the division of finances on divorce - leading to so-called 'forum shopping' within the UK. The Commission has asked the Family Justice Council to provide more detailed guidance on financial need with the view of creating greater predictability on outcomes.

Katie adds: "The Commission is exploring the possibility of whether a formula should be adopted to give divorcing couples a clearer idea of the amounts required to be paid to meet needs. Such a formula would be of concern to family law practitioners: whilst it would deliver certainty it is unlikely to lead to fairness in many cases. It is difficult to see how such a restrictive approach could provide the flexibility required to meet the divergence in each family's unique circumstances. Each case turns on its own facts."

Katie adds: "A lot of the issues raised in financial proceedings on divorce are highly contentious and relate to the value and liquidity of assets, and whether assets should be treated as matrimonial or non-matrimonial. It is difficult to see how a formula will be used when couples are unable to agree on these preliminary issues.

"A formulaic approach would certainly have a significant impact on whether this country, and particularly London, would remain the 'divorce capital' of the world for the financially weaker party."

27 February 2014 

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