Pre-nuptial agreements
Following the recent, much publicised, cases of Crossley and Mills -v- McCartney, the Family Law team at Higgs & Sons Solicitors brings you an update on where we now stand on this crucial issue for your clients, and answer some of the key questions that they will ask.
What is a pre-nuptial agreement ?
A Pre-Nuptial Agreement or a Civil Partnership
Agreement is an agreement made between two parties who intend to
marry or register a civil partnership, setting out what the parties
have agreed will happen to their assets upon permanent separation,
divorce or dissolution. Some consider this unromantic at a time
when parties are just starting off their marriage, however
Pre-Nuptial Agreements are not about not trusting your partner, but
about providing for the future. Compare the situation to a home
owner, they wouldn't think twice about house insurance, but they
don't intend for their house to burn down. Pre-Nuptial Agreements
are no different, and not only provide peace of mind but can also
save couples a lot of money in the long run.
When should a pre-nuptial agreements be
used?
When one, or both parties separately, have built up or
acquired assets prior to
the relationship; or there is a disparity in the parties incomes;
or a party is a beneficiary or potential beneficiary under a
trust; or one or both of the parties stand to receive a substantial
inheritance.
Are pre-nuptial agreements legally binding?
Pre-Nuptial Agreements are currently not legal
binding documents, however if entered into correctly they are a
record of the parties' intentions and the courts must take them
into account when considering the distribution of assets upon a
divorce. In recent years the courts have upheld a number of
Pre-Nuptial Agreements and have urged the government to introduce
legislation to make them formally binding. Nowadays, those without
a Pre-Nuptial Agreement may be in a prejudicial position.
How can I best ensure that my pre-nuptial
agreement will be taken into account?
Firstly, professional advice from accountants,
financial advisers and solicitors is essential. In addition there
are some key guidelines to be followed:
Both parties must have received independent legal advice at least
21 days prior
to the marriage;There must not have been any duress placed on
either party;
There must have been full disclosure of both parties' respective
financial circumstances; and The agreement must be reasonable and
not cause significant injustice.
What if I am already married or not intending to
get married?
Protection of assets isn't restricted to just those
who are intending to get married. Married couples can enter into a
Post-Nuptial Agreement provided that it is entered into reasonably
shortly after the marriage and the guidelines above are followed.
Those who are living together, or contemplating it, should give
serious thought to a Cohabitation Agreement, as partners may
otherwise be unintentionally gaining an interest in your assets,
most commonly a home.
What are the latest developments in pre-nuptial
agreements from the courts?
With the judgment in the case of Heather Mills and
Sir Paul McCartney still hot off the press, it is another case
recently heard in the Court of Appeal that has caught the eye of
many practitioners in this area. The case of Susan Crossley, who
was described as a "career divorcee" by her most recent ex-husband,
are likely to leave a large impact on Family Law and in particular
the use and popularity of Pre-Nuptial Agreements.
What were the facts?
After three previous marriages to wealthy husbands
Mrs Crossley had accumulated wealth of £18m when she met Stuart
Crossley in the summer of 2005. By early 2006 the couple were
married after a whirlwind romance, however before the wedding day
the parties entered into a Pre-Nuptial Agreement that neither would
claim against the other should the marriage fail. 14 months later
the relationship ended.
Mrs Crossley tried to argue that the Pre-Nuptial Agreement should be disregarded as Mr Crossley had failed to disclose every aspect of his wealth when the agreement was signed and claimed he had not divulged tens of millions in offshore accounts.
What did the court decide?
In December 2007 Mrs Crossley's case hit a setback
when Lord Justice Thorpe heard the matter in the Court of Appeal.
He stressed the "magnetic importance" of the Pre-Nuptial Agreement.
A further hearing was set for mid February 2008 to look at the
Pre-Nuptial Agreement, but it was given only a one-day time
estimate which was described by Mrs Crossley's solicitors as a
"knockout blow" as the short hearing meant her claim would probably
be thrown out.
On the eve of the hearing Mrs Crossley withdrew her application, demonstrating that she accepted that she stood little chance of claiming against her most recent husband due to the existence of the Pre-Nuptial Agreement.
Where does this leave us now?
The case has further strengthened the legal
position of Pre-Nuptial Agreements and is a further clear
indication from the court that a well drafted agreement can be
effective. Society now needs to catch up and take advantage of the
protection that Pre-Nuptial Agreements can afford them.
What about Mills - v - McCartney?
Aside from the obvious fascination about the case
and the very public nature of the hearings, Sir Paul McCartney has
undoubtedly benefited from his wife's decision to represent
herself.
The final sum of £24.3m represents only around 6% of his estimated net wealth of £400m and in the face of previous court judgments in similar fact cases, appears to be a below par judgment for Heather Mills. However, Sir Paul is no doubt regretting the fact that he didn't save himself several million pounds, not only from the settlement, but also in the not inconsiderable fees of Fiona Shackleton, by uttering those magic words 6 years ago, "Let's get a Pre-Nup!"
If you require further advice or assistance please contact the Family department at Higgs & Sons by calling 01384 342100.
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