Court ruling changes legal landscape for divorce | 25 October 10

Teresa Davidson and Jonathan Flower from the Family Law team at Ward Hadaway look at how a recent court ruling has brought pre-nuptial agreements to the fore.

The decision of the Supreme Court in the case of Radmacher v Granatino on October 20 has dramatically changed the legal landscape when it comes to pre-nuptial agreements.

While the case itself involved a German heiress (with estimated wealth of some £100m) and her French husband, the judgment has implications for thousands of couples in England and Wales who wish to agree, in advance of marriage, the manner in which financial issues should be resolved upon any later divorce.

Prior to Radmacher, whilst the Courts in England and Wales were more inclined to recognise the existence of such agreements, there was still a significant issue as to their enforceability. Radmacher goes a long way to resolving this.

The Supreme Court have decided in principle, that Judges, when dealing with financial claims on divorce, should give effect to pre-nuptial agreements. However, this is subject to provision that the agreement must have been freely entered into by the parties with full appreciation of its implications.

The Judge must consider whether or not it would be unfair to hold both parties to the agreement.

The decision suggests that in terms of enforceability, there is a strong, but not absolute presumption that pre-nuptial agreements will be binding on the Court.

The Supreme Court themselves have said that those who now enter into pre-nuptial agreements will be considered to have intended their agreement to take effect.

So what are the implications for anyone contemplating marriage?

Arguably, those seeking to protect assets and wealth from later divorce can take significant comfort from the judgment to the extent that the courts will now be more likely to uphold pre-marital wealth planning in the form of a pre-nuptial agreement.

This is especially important where one party to the proposed marriage is much wealthier that the other, where someone has inherited assets, in respect of those marrying for a second time or those who expect to inherit during the marriage.

However, when entering into a pre-nuptial agreement, certain formalities must still be observed as failure to do may impact on its enforceability.

For instance, parties cannot be compelled to enter into such agreements whilst the court must still consider whether or not it would be fair to hold both parties to the agreement.

It should always be borne in mind that the Court remains the final arbiter as to the validity of the agreement and as to the terms of any divorce settlement.

Anyone who thinks they might benefit from a pre-nuptial agreement, or who wants to try and avoid a later dispute over marital finances should seek legal advice.

For those with significant or inherited wealth, the process should take place in consultation with tax and accountancy advisors.

The cynics may ask - why bother with a pre-nuptial agreement if the Court can still decide on what is fair?

The Supreme Court provided the answer in the Radmacher judgment, when the Justices stated: "The fact of the agreement is capable of altering what is fair".

There are some who say this approach to marriage is unromantic. Others believe the decision should have been left for Parliament to decide, bearing in mind that The Law Commission is due to report in 2012 on the issue of pre-nuptial agreements.

For the moment, however, the Supreme Court judgment is the next best thing to reform in this area and the Justices have made their views quite clear - anyone who has (or may have) assets which they wish to protect from sharing with their spouse on divorce should have a pre-nuptial agreement.

Provided this is done carefully in order to ensure the protections referred to by the Supreme Court have not been flouted this will assist in protecting your assets in the future.

* Teresa Davidson is an Associate and Jonathan Flower is a partner and head of the Family Law team at Ward Hadaway.

For further guidance on any of the issues raised in this article, please contact teresa.davidson@wardhadaway.com or jonathan.flower@wardhadaway.com or visit our Family Law page for more details on our services.