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Pre-nuptial agreements, post-nuptial
agreements and divorce
Are they worth the paper they are written
on?
Pre-nuptial agreements, post-nuptial agreements and divorce
Pre-nuptial agreements, post-nuptial agreements and divorce
Are they worth the paper they are written on?
Since the widely publicised case of White v White, orders seeking to
divide all assets equally on divorce have become commonplace in
lengthy marriages. As a result, the use of pre-nuptial agreements
(commonly known just as “pre-nups”) has increased significantly as
wealthier individuals seek to protect themselves against the ravages of
financial orders on divorce.
Post-nuptial agreements (or, colloquially, “post-nups”) i.e. agreements
entered into during the marriage itself, have tended to be less well known
and less frequently used. However recent legal developments have
brought them much more into focus.
Pre-nuptial agreements
A pre-nup is not enforceable as a contract and would not be binding on
the family courts on any subsequent divorce because the judges must,
for reasons of public policy, retain an independent discretion as to how
assets should be split on divorce.
So what value does a pre-nup have?
Any judge dealing with a case must weigh up all the circumstances of the
case, including a wide range of specified factors. The court may therefore
give effect, or partial effect, to a pre-nup by holding it to be both a
circumstance of the case and relevant financial conduct of the parties
(one of the specified factors).
In the 2010 case Radmacher v Granatino, the Supreme Court enunciated
the test that will be applied:
“The Court should give effect to a nuptial agreement that is freely
entered into by each party with a full appreciation of its implications
unless in the circumstances prevailing it would not be fair to hold
the parties to their agreement”.
Thus the question arises: when will it be fair, and when will it not be fair,
for a judge effectively to enforce a pre-nuptial agreement? Although this
will ultimately need to be decided on a case-by case basis, some
guidance was offered by the Supreme Court:

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The usual ‘vitiating factors’, duress, fraud and misrepresentation,
Pre-nuptial agreements, post-nuptial agreements and divorce
will considerably reduce the weight of an agreement.

Other forms of pressure or unconscionable conduct may also
reduce or eliminate the effect that an agreement may have.

Circumstances pertaining at the time the agreement was signed
may be relevant: Would one party not have married without it
(and what pressures might this have created)?

Do the parties’ respective ages, maturities and experiences give
any cause for concern?

It will not be fair or appropriate to allow an agreement to prejudice
the reasonable requirements of any children of the family.

The autonomy of adults should be respected. It is ‘paternalistic
and patronising’ to override the terms of an agreement simply on
the basis that ’the Court knows best’.

There is nothing inherently unfair about an agreement that seeks
to ‘ring fence’ what might be called ‘non-matrimonial property’,
including family wealth, inheritances and assets owned prior to
the marriage.

In general terms, the longer a marriage endures following the
signing of an agreement, the greater the chance that it may not
be fair to hold the parties to its terms. This is because it is more
likely that there will have been unanticipated changes in
circumstances. This is more likely to be the case for a young
couple starting marriage with few assets and ‘all to play for’ than
where, for example, significant assets have already been
accrued. Therefore the extent to which a pre-nup anticipates and
foresees future events and deals with them in a fair manner may
be important.

If the effect of an agreement would be to leave a party with less
than his or her relationship-generated ‘needs’, then this is likely to
be unfair.

Furthermore, if one party has a valid argument for an element of
‘compensation’ (e.g. for loss of earning power following a joint
decision that one spouse should give up a career to look after
children), then an agreement which precludes or ignores such
compensation is also likely to be unfair.

However, if ‘needs’ and ‘compensation’ are adequately covered, a
nuptial agreement may effectively prohibit further sharing of the
assets.
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Pre-nuptial agreements, post-nuptial agreements and divorce
Times change
When considering a pre-nup you should remember that your economic
circumstances could deteriorate and that you might nonetheless be
caught by the terms of the pre-nup when you divorce. To illustrate the
point any of the following could occur:

you may have children who were not foreseen when the pre-nup
was negotiated;

you, your spouse or your children could develop a serious illness;

either of you could lose the majority of your money in unwise
investments; or

either of you may not inherit as you expected.
The need for sound advice
In the light of Radmacher, wealthy or potentially wealthy individuals
(including those who may inherit such wealth in the future, or who have
interests in family trusts) would be well advised to consider entering into
a pre-nup. However, they should only do so having obtained specialist
advice (for which this booklet is no substitute) on the nature of the
agreement, the formalities that should accompany it and whether the
proposed terms are, from the legal point of view, appropriate.
Questions that should be considered include the following:

Did both parties understand the agreement? Is it written, for
example, in a language in which both parties are at least
reasonably fluent (or, if not, was there the option to seek a
translation, even if this option was not taken)?

Were they properly advised as to its terms? It is important that
each party has (or at least had the opportunity to seek)
independent legal advice to guard against any accusation that
they did not really understand what was happening and the effect
of the agreement.

Was there any pressure to sign it? This could be pressure from
family, not just the future spouse. Timing can also be important
here as negotiating an agreement within a short time of an
organised wedding could put one party under pressure to sign to
avoid ruining the wedding.
A Government Green Paper
suggested a 'cooling off' period of at least 21 days between the
date of the agreement and the date of the marriage. Although this
does not have the force of law a period less than this could
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Pre-nuptial agreements, post-nuptial agreements and divorce
indicate undue pressure was applied.

Was there full financial disclosure? The courts are likely to be
less inclined to attribute weight to an agreement that was entered
into without there being adequate financial disclosure (perhaps in
summary form, or by reference to general bands of wealth, which
may be particularly apposite where there is a very high level of
wealth which is difficult to quantify at any given point). Recent
case law suggests that this will not necessarily by so, though,
where one party had the chance to ask for financial disclosure but
chose not to do so, perhaps because they already had an
appreciation of the other party’s wealth.

Did either party exploit a dominant position either financially or
otherwise?

Was the agreement entered into in the knowledge that there
would be a child? It is in any event not possible for a nuptial
agreement to limit financial provision referable to children

Has any unforeseen circumstance arisen since the agreement
was made that would make it unjust to hold either party to it?

What does the agreement actually mean – is it clear?

Are there any grounds for concluding that an injustice would be
done by holding the parties to the terms of the agreement?

Would the judge be breaking new ground by implementing the
agreement?
Post-nuptial agreements
It was previously thought that a post-nup had a separate legal basis to a
pre-nup, which meant that they could potentially be binding upon the
parties (unlike pre-nups, as explained above). However this anomaly
was corrected in the Supreme Court decision in Granatino v Radmacher
where the judges decided that post-nups should be considered no more
or less effective in principle than pre-nups: the difference between the
two is simply one of timing. This being so, a court may be more easily
compelled by a recent and relatively ‘up-to-date’ post-nup than by an old
pre-nup, the terms of which lack the flexibility to keep up with the times.
It should be borne in mind that post-nups, especially later in a marriage,
can be controversial and should not be suggested lightly.
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Pre-nuptial agreements, post-nuptial agreements and divorce
Could I have both?
Yes. It may in many cases be appropriate to put in place a pre-nup and
then, some time later after the wedding and if the parties’ circumstances
have changed considerably, to enter into a post-nup.
The post-nup
could then contain entirely new provisions or may simply “re-endorse” the
terms of the pre-nup. It need not necessarily, therefore, involve the
drafting and negotiating of an entirely new agreement albeit the financial
disclosure will need to be updated.
Pre-nuptial agreements and post-nuptial agreements made in
foreign jurisdictions
Foreign nationals who may choose to live in England after marriage are
often not aware that the fact of their residence in England could be
sufficient to give the English courts jurisdiction to hear any subsequent
divorce proceedings. In addition to that, and perhaps of greater concern,
is that any existing foreign agreements in relation to the division of assets
on divorce (including marriage settlements and nuptial contracts which
are binding in their country of origin) cannot be of binding effect in
England and may be considered formally or substantively defective from
an English point of view.
Those who have entered into foreign pre-nuptial documents may
therefore need to draw up and agree English mirror versions: certainly
specialist advice should be sought
Conversely international couples should be aware that in certain other
jurisdictions there is a requirement that pre-nuptial agreements be
registered in a public record. Care may therefore need to be taken to
ensure that English financial disclosure is not unwittingly publicised.
Are there any other legal issues I should consider?
A marriage will generally revoke an existing Will. It is likely that there will
be a need for a new Will (which can be signed shortly after the wedding
or in anticipation thereof) making proper provision for a spouse, which
may well be something that has been agreed in a pre-nuptial agreement.
In addition, letters of wishes which accompany either existing trusts or
those to be established under a Will should be reviewed and amended as
appropriate.
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Pre-nuptial agreements, post-nuptial agreements and divorce
About Speechly Bircham
We are a City-based law firm with a strong focus on personal service and
building long-term relationships with our clients. We provide transactional,
advisory and dispute resolution services to our three main client markets:
business clients; private clients and clients in the real estate, construction
and engineering sector.
Named ‘Private Client Law Firm of the Year’ by Spear’s Wealth
Management 2009, our Private Client Services group is ranked in the top
10 in the world and is the largest private client practice in London with 22
partners and over 60 fee-earners. Our clients include: wealthy UK
individuals, non UK domiciled individuals, non residents, entrepreneurs,
families and trusts as well as privately owned businesses, charities and
quoted companies. We advise on all aspects relating to wealth
preservation and the mitigation of tax as well as on family, property and
related corporate matters.
For more information
If you would like further information, please contact:
Christopher Butler
+44 (0)20 7427 6618
[email protected]
James Freeman
+44 (0)20 7427 6584
[email protected]
Richard Hogwood
+44 (0)20 7427 6721
[email protected]
John Nicholson
+44 (0)20 7427 6548
[email protected]
To the best of our knowledge and belief this guide correctly states the law and practice as at 1
January 2011. It is however written only as a general guide and therefore specific professional advice
should always be sought before any action is taken. Speechly Bircham LLP is a limited liability
partnership registered in England and Wales (registered number OC321620) and is regulated by the
Solicitors Regulation Authority. © Speechly Bircham LLP 2011
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