Pre-nups for wealth protection given further boost
Author: Adam Maguire
Applies to: England and Wales
Prenuptial agreements (Pre-Nup's) as a tool for wealth protection have been given a further boost by the court with the Family Court recently holding parties to the terms of their Pre Nup where the marriage ended after just 12 weeks.
The Family Court described the circumstances in H v H  EWFC B81 as a 'paradigm' case for upholding the terms of a Pre Nup.
Nuptial agreements, whether entered into before or after a marriage, are contracts to regulate the division of property and deal with income and other issues in the event of a marriage breaking down. They avoid the need for the parties to submit themselves to the uncertainty and expense of a Court application.
While not legally binding, the Court is increasingly upholding nuptial agreements entered into freely with full appreciation of the implications. Careful drafting, legal advice and the exchange of full, frank and clear financial disclosure are a must.
For affluent individuals, the Family Court is a far greater threat to wealth than almost anything else, including tax. The Family Court has huge discretion and jurisdiction over all assets of either party to the marriage including land, investments, pensions, shares, interests in trusts and business assets.
The latest case is a clear example of the Family Court respecting the autonomy of individuals. Parties should now expect to be held to the terms of agreements which have been properly negotiated. The increase in popularity of Pre and Post Nups reflects this trend and this is unlikely to slow down. Nuptial agreements are an increasingly essential and often invaluable tool when considering wealth planning measures.
The case of H v H concerned a husband and wife who were 72 and 64 years old respectively. The husband was relatively wealthy while the wife had very little by comparison. They met in 2012 and had established a relationship by September 2013. The parties married in December of that year. Before the marriage, they had entered into a Pre Nup. This provided each was to retain what they owned prior to their marriage and neither was to have any claim against the other.
The parties separated just 12 weeks after the marriage in March 2014. The wife made allegations that the husband had committed a serious offence against her. The husband was charged and prosecuted but was acquitted by the Crown Court in January 2015.
The wife sought to escape the terms of the Pre Nup, arguing that she suffered from medical issues and had no real earning capacity. She relied on the alleged offence as a reason why the agreement should be torn up. The Court did not agree, holding that she should be bound by the contract they had entered into.
The outcome would no doubt have been different but for the existence of the Pre Nup.
This decision represents the latest in a long line of cases demonstrating how effective nuptial agreements can be at curbing the reach of the Family Court. Fairness still reigns and it is open to the Court to ignore the terms of an inherently unfair agreement. Specialist legal advice and sensible financial planning can, however, dramatically alter the outcome that would otherwise be achieved before the Family Court with its wide and often unpredictable discretion.
This document is for informational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.