What makes a prenup agreement “Fair” under English Law?
A fair prenup agreement not only strengthens its chances of being upheld by the court but also provides a balanced and transparent foundation for a couple’s financial future. The concept of fairness in prenup agreements was clarified in the landmark case Radmacher v. Granatino and subsequent case law. This guide outlines the essential components of a fair prenup agreement and what fairness means under English law.
Key elements of a fair prenup agreement
1. Voluntary agreement without pressure
A fair prenup agreement must be signed willingly by both parties without coercion, undue influence, or time pressure. The court will take into account factors such as the parties’ emotional state, their age and maturity, whether a party had been married before and whether the marriage would go ahead without a prenup agreement. The timing of the agreement is critical—signing a prenup agreement too close to the wedding can suggest that one party felt pressured to agree. For this reason, it is recommended that a prenup agreement be finalised at least 30 days before the wedding.
2. Independent legal advice for both parties
To ensure fairness, both parties must seek independent legal advice before signing the agreement. Each party should have the opportunity to understand the implications of the prenup agreement’s terms and receive tailored advice on how the agreement affects their rights and obligations. The absence of independent legal advice can lead a court to conclude that the agreement was not entered into fairly.
3. Full and honest financial disclosure
A fair prenup agreement requires full transparency about each party’s financial circumstances. Both individuals must disclose their assets, liabilities, income, and expected future financial prospects. Financial disclosure should be documented in a structured manner and signed off by both parties. If one party fails to disclose significant financial information, the court may view the agreement as unfair and decline to enforce it.
4. Provisions that avoid extreme hardship
Fairness requires that the terms of the prenup agreement do not leave one party in a position of significant financial hardship after divorce. For example, if enforcing the agreement would leave one party without adequate housing or financial support, the court is likely to intervene.
To ensure fairness, the prenup agreement should anticipate various scenarios, including changes in income, employment status, or financial responsibilities, such as the birth of children. The agreement should include reasonable provisions for spousal maintenance or financial adjustments where appropriate.
5. Mutual benefit and reasonable outcomes
A fair prenup agreement should not be grossly one-sided. While protecting certain assets (such as a family business or inheritance) is a common goal, the prenup agreement should provide reasonable financial security for both parties. Courts are more likely to enforce prenup agreements that balance asset protection with adequate provision for the economically weaker party.
6. No prejudice to children
A fair prenup agreement cannot prejudice the reasonable requirements of any children of the family. However, care must be taken to avoid attempting to address all future contingencies as it would be unfair to hold the parties to an agreement that provided for uncertain future circumstances.
7. The contribution of homemakers is acknowledged
Where one partner is the breadwinner and the other is the homemaker, a fair prenup agreement will not deprive the homemaker of wealth that has been earned or accumulated during the marriage or civil partnership.
Examples of fair prenup agreement provisions
- Protection of pre-marital assets: It is fair for a prenup agreement to protect assets acquired before the marriage, such as family wealth or inherited property, provided that the economically weaker party is not left without adequate financial support. The separation of pre-marital assets can become weaker as time passes, particularly where such assets are sold or co-mingled with marital assets. Addressing this in the prenup agreement can be helpful in providing clarity as to how the parties intend the definition of marital assets to change over time.
- Spousal maintenance: Including a provision for reasonable maintenance payments if one party’s financial position is significantly weaker post-divorce can help demonstrate fairness.
- Review clauses: A fair prenup agreement may include clauses that allow the agreement to be reviewed and updated after significant life events, such as having children or acquiring substantial new assets.
What courts consider when evaluating fairness
When deciding whether to enforce a prenup agreement, the courts consider:
- The intention of the parties: The courts place great emphasis on personal autonomy. Subject to the parties’ being independently advised, entering into the prenup agreement freely and having a full understanding of what they are agreeing to, a prenup agreement should be enforced to the extent that it is fair to do so.
- The circumstances at the time of signing: Was there sufficient time for consideration, legal advice, and negotiation, and did each party take independent legal advice?
- The situation at the time of enforcement: Have there been significant changes in circumstances that make enforcing the prenup agreement unfair?
- The economic disparity between the parties: Does the agreement leave one party significantly worse off or in financial need?
Strengthening the fairness of your prenup agreement
To ensure that your prenup agreement has the best chance of being upheld by the court, you should instruct a solicitor to draft a bespoke agreement tailored to your needs and circumstances. You should instruct a solicitor as early as possible – prenup agreements entered into too close to your marriage risk being unenforceable.
Conclusion
A fair prenup agreement provides a clear, mutually beneficial framework for managing finances within a marriage and can help avoid future disputes. By ensuring that the prenup agreement is voluntarily signed, supported by independent legal advice, and based on full financial disclosure, you improve the chances of your agreement being upheld by the court.
Prenup Solicitors can guide you through the process of drafting a fair, enforceable prenup agreement tailored to your unique needs. With expert advice and thorough preparation, you can protect your interests while ensuring fairness for both parties.