Law Commission announces prenup plans

Law Commission

The Law Commission has recommended the introduction of legally binding ‘qualifying nuptial agreements’ in place of full prenuptial agreements.

Qualifying nuptial agreements would allow both married couples and civil partners to make a mutual agreement on how their finances or property should be divided if they split, but they would only apply after the financial needs of both partners and their responsibilities towards any children had been met. In addition, such agreements would only be legally binding if both partners had disclosed all relevant information about their financial situation and had received legal advice.

Under current legislation, couples can enter ‘prenups’ – agreements on the division of assets in the event of separation – but they are not legally binding and whether the  divorce courts give them any weight depends on the circumstances of each case. The same applies to postnuptial agreements, made after marriage.

The Commission’s new report, Matrimonial Property Needs and Agreements, includes a draft bill which would introduce prenuptial agreements into law.

The Law Commission, which reviews existing legislation, has also recommended that the Family Justice Council produce authoritative guidance on financial needs in divorce, explaining financial outcomes including financial independence. They have also suggested that the government investigate the introduction of a formula which could be used to calculate financial needs. Existing legislation in Canada provides guidelines which couples can negotiate from.

The Commission said:

“…there is evidence of regional inconsistencies in how the courts approach orders  for financial needs, which can make the outcome unpredictable. And, while the law is largely well-understood by family lawyers, it is not clear to the general public who are increasingly dealing with the financial consequences of separation without legal assistance.”

Professor Elizabeth Cooke, the Law Commissioner for property, family and trust law, said:

“We believe that married couples and civil partners should have the power to decide their own financial arrangements, but should not be able to contract out of their responsibilities for each other’s financial needs, or for their children. The measures we are recommending would help couples understand and meet their financial responsibilities and, where appropriate, achieve financial independence.

“Pre- and post-nuptial agreements are becoming more commonplace but the courts will not always follow them and lawyers are therefore not able to give clear advice about their effect. Qualifying nuptial agreements would give couples autonomy and control, and make the financial outcome of separation more predictable. We have built in safeguards to ensure that they cannot be used to impose hardship on either party, nor to escape responsibility for children or to burden the state.”

These measures are perfect. They are tempered. While the Law Commission does not recommend radical change, it has recognised what family lawyers already know. Because of the economic situation and the Government’s demolition of family law legal aid, fewer people are able to access professional legal advice. As a result, confusion abounds and it is now necessary to provide additional information and “simplify” the current system.

Most people are not wealthy so, in the majority of cases when couples divorce, there is little to go around after reasonable financial needs have been met. At the same time the current guidance on what it means to “meet reasonable needs,” and how those needs should be met is inadequate.

Although the Law Commission is recommending that nuptial agreements should become binding in law, it also proposes rigid criteria, so an unscrupulous spouse would be unable to “contract out” of providing for their children.

Importantly, the Law Commission specifies “financial needs” but not “reasonable needs,” which can be more generous. In other words, if no financial hardship was going to occur then the agreement could be upheld. This would provide scope to depart from current law, provided full and frank disclosure had taken place and proper legal advice had been obtained.

As for making settlements more predictable with the introduction of formulae, but with built-in flexibility: this could only help couples. Right now, the outcome of a case can be something of a postcode lottery.  ‘Clean break’ capital payments for stay-at-home mothers, for example, are practically unheard of in central London but are more likely in certain other regions. It makes spousal maintenance even more of a prickly subject than it needs to be: the ‘meal ticket for life’ is generally regarded as a bad thing, not least by a second wife who may feel she is having to work to maintain her predecessor. Then again, should a mother who has given up work to raise children be left high and dry because her marriage has broken down and a clean break is not possible at the time of the divorce? Formulae with a range of possible outcomes may help.

Marilyn Stowe

The senior partner at Stowe Family Law, Marilyn Stowe is one of Britain’s best known divorce lawyers with clients throughout the country, in Europe, the Far East and the USA.

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11 comments

Gentlergiant - February 27, 2014 at 9:49am

My initial reaction to the proposals is bitter disappointment. The absolute and deliberate lack of clarity about the position of pre-marital and/or inherited assets, the scope for continued argument over ‘needs’, and the range of get-out clauses will not help either party to marriage, with or without a pre-nup, have any certainty about a court’s financial decision. Nor will anything here reduce the cost of fighting against the ‘entitled’ or the unscrupulously advised. Marriage remains, sadly, an excellent way of taking someone’s assets, however those assets were derived.

Paul - February 27, 2014 at 11:25am

Spot on, 100%, Gentler. When judges reserve the right to interfere, interference can be predictably guaranteed. The concept is meaningless without assurances, statutory or judicial, that an agreement holds fast as you’re otherwise just signing a non-binding contract which either party can walk away from.

JamesB - February 27, 2014 at 11:26am

I agree with the above comment. A bad outcome for marriage and everyone in the country except lawyers. The only workable alternative to prenups is getting rid of no fault divorce, which I agree to. So, those up high say the man on the street gets stuffed, not good for marriage at all.

JamesB - February 27, 2014 at 11:27am

The man on the street continues to get stuffed in divorce or doesn’t get married, a terrible outcome and terrible solution from the law commission.

JamesB - February 27, 2014 at 11:34am

Everyone should be able to get married without the threat of a horrific divorce ruining them, prenups would have given this ability.

To explain, as per everyone else shouting the same thing.

Without pre nups and with no fault divorce all it takes is the woman to decide she is unhappy and then ruin the man and take his children away and get him to pay for it, that stinks.

I cannot advise my son to get married under the current or proposed law – too risk. Very sad and upsetting for me and him as I would like for him to get married. Its too much to ask to expect a chap to take the risk as the law stands, but I am beginning to repeat myself again.

JamesB - February 27, 2014 at 11:34am

They need to get real.

JamesB - February 27, 2014 at 11:41am

Bad for society this as marriage should and could be a good thing all round.

Luke - February 27, 2014 at 3:31pm

I tend to agree, it will still be better than nothing but the devil will be in the detail of what ‘needs’ actually means – as this is not clearly defined it leaves a massive loophole for Judges to largely ignore the prenup and impose pretty much whatever they want – after a costly scrap in court over the definition of this ‘needs’.
Judging by the actions of the legal system to date I suspect this is how it will turn out and their will be much wailing and gnashing of teeth…

Divorce Easily - February 27, 2014 at 4:43pm

It was unlikely that the Law Commission was ever going to recommend that prenuptial agreements should be made directly enforceable without a whole barrage of safeguards (including that financial needs must be met). It would simply be too big a move from the current law.

The Law Commission’s intention is good – to make sure any settlement is ‘fair’. However, without a very clear definition of ‘financial needs’ there is no clarity and finding a definition is going to be neither quick nor easy. Without a definition it won’t be possible to change the law on prenuptial agreements.

Therefore, the only thing that is clear is that nothing is likely to change on this topic any time soon. The best thing that people considering divorce can do is learn how the Courts approach a division of assets and then negotiate a settlement with a mediator.

While it’s terribly sad to say, James B is right: for someone wanting to protect their assets on divorce, the best advice is not to get married.

Andrew - February 27, 2014 at 5:48pm

“Needs” should be precisely defined as enough to avoid you being a burden on the taxpayer. And no more. Any protection for children should be by postponing enforcement of the agreement until the children are older – not beyond the majority of the youngest.

MC - February 28, 2014 at 11:18am

Doesn’t go anywhere near enough – and the “no blame” culture is a licence for feckless women to ruin decent, hard working men. My ex left for and now lives with a neighbour she had an affair with – and left with impunity knowing that she would get half of everything (bringing nothing into the marriage) including an inheritance from my parents and now she and her boyfriend are both unemployed in their 40s/50s while I am past retirement and unwell but still work with about half my income and half my annuity going to them – the problems are “no blame” and the judges’ attitude to mitigation – my ex has made no attempt at work with no rebuke from the court and they both seek to live off me – the reforms need to put responsibility with those who take the decisions which create the unwanted consequences

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