Last week, a group of senior judges warned that the vast majority of people who sign a pre-nuptial agreement are wasting their time and money.
A document, produced by the Family Justice Council suggested that, for the vast majority of those going through a divorce, a ‘pre-nup’ between the two parties should be ignored by the judge, in the interest of fairness.
What is a pre-nup?
They used to be the reserve of the rich and famous; and although they may not be the most romantic of gestures, with more than 40 per cent of marriages now ending in divorce, more and more people are choosing to protect their financial arrangement with a pre-nuptial agreement.
Put simply, a pre-nup is a formal contract between two people who are to be married. The agreement is usually driven by financial interests, setting out how the couple’s assets would be divided should the marriage end in divorce. However, it is not uncommon for pre-nups to include details regarding child care, property, possessions and even pets!
As such, pre-nuptial agreements are often a good indication of the terms under which both parties entered into the marriage and set out their wishes in anticipation of a future divorce, in writing.
So what’s the problem?
It’s only recently that the family courts have been able to agree as to what extent pre-nups were legally binding.
Strictly speaking, a pre-nuptial agreement is not binding on either party – each is permitted to change his/her mind and state that they no longer wish to abide by the terms set out in the document. Equally a judge could choose to only use a pre-nuptial agreement for guidance, or ignore it altogether, if they believed either party was at risk of being treated unfairly.
Nonetheless, the number of divorcees using a pre-nup as a tool in their divorce has increased exponentially over the past seven years, since the Supreme Court ruled that it was ‘increasingly unrealistic’ for judges to ignore them.
So what’s changed?
The latest guidance has sided with those who believe the pre-nup to be more of a hindrance than a help.
The document, entitled ‘Sorting out Finances on Divorce’ has said that the primary concern of family judges is that any division of assets is fair to all parties and that all needs are met. As such, for ordinary couples with only moderate financial and material wealth, a judge will only ever consider a pre-nuptial agreement if he/she is satisfied that the needs of each party have been met, particularly where children are involved.
For most, once the assets ‘in the pot’ have been divided to meet each party’s needs, there will be very little left to be governed by a pre-nuptial agreement.
Does that mean it is pointless getting a pre-nup?
That very much depends on who you are and how much money you have.
If you are a multi-millionaire oil baron with incredible amounts of disposable income, while your ex-partner was far less well off at the time of your marriage, you might expect a judge to take a pre-nuptial agreement into consideration. This is because your collective assets are such that the basic needs of your ex can be provided for, but with plenty of money left over, the judge will turn to the pre-nuptial agreement for guidance on how to divide it.
However, if you are only earning a moderate amount of money at the time of your marriage, and your partner was even a little less well off, you might expect the assets to be divided more equally, regardless of what any pre-nuptial agreement might say. This is because the collective assets are far more limited, so once the basic needs of each party have been met, there is little if nothing left to divide.
Is my existing pre-nup now null-and-void?
No. Any existing pre-nup still stands and remains one of the many criteria that a judge will use to determine a final settlement.
However, in light of this most recent guidance, the importance of a pre-nup could be significantly diminished in the majority of cases.