The risks behind pre-nuptial agreements
By:1 commentMay 27, 2014
Pre-nuptial agreements are on the rise.
On the surface, they seem straight forward enough. Basically, pre-nuptial agreements, or ‘prenups’, are agreements between couples before they get married setting out the terms of settlement should they divorce.
If that becomes the case, what are the implications? Two family law barristers Andrzej Bojarski and Rhys Taylor wrote a very interesting article on the subject hoping to “stimulate debate”.
They referred to Mr Justice Mostyn’s recent statements that independent lawyers will normally need to advise both parties in the preparation of a prenup, as agreements made solely between the future spouses will very rarely hold much weight in court.
In addition to the extra work this will produce for family lawyers, it also brings with it an element of risk.
Considering that a majority of prenups are made in cases where there are substantial assets involved, and there is often no way of knowing by how much a person’s wealth may grow over the course of a divorce, family lawyers could potentially find themselves vulnerable to liability for negligent advice.
If prenups were made legally binding, their popularity could continue to skyrocket.
With that in mind, family lawyers could end up advising vast numbers of clients in drafting their agreements, so if fault is found in one of their cases, what would protect them from liability from all of their clients?
Two possible solutions are professional indemnity insurance or the limiting of liability by a contract between the lawyer and the client.
Indemnity insurance would make it possible for a lawyer to pay back the losses suffered by a client they had given negligent advice, up to a point.
The problem with such a policy is that is often impossible to know just how big a loss that could be considering how difficult it is to accurately predict a client’s wealth will be if and when they decide to divorce.
This is especially a concern for lawyers who do not have a corporate structure behind them.
The alternative would be for the client to sign off on a contract which would either limit or completely eliminate a lawyer’s liability if their advice does not work out favourably.
These kinds of contracts are already common in other walks of professional life. Accountants routinely have them when dealing large corporations.
Unfortunately, this is not yet common practice in family law. That opens up the possibility that if a lawyer tried to protect him or herself from liability in this way, the client could opt to use a lawyer without those provisions in place.
Are these really adequate solutions?
Lawyers need to think very carefully about the potentially difficult situations they could find themselves in should the prenup become legally binding.
A prenup is one way to stop a marriage. It can be very dangerous to sign if you are the weaker party going in, but it could also be dangerous for the lawyer of the weaker party.
Photo by bradleygee via Flickr
May 27, 2014
Categories: Prenuptial Agreements