Prenuptial agreements (PNAs) are always ‘hot topic’ for family lawyers and are rarely out of the legal headlines. The Law Commission’s scoping report published in December 2014 has ensured there is no sign of this changing. The Law Commission were specifically asked to look at whether the issue of nuptial agreements needed to be reviewed beyond the recommendations already made by them in 2014. They recommended that binding ‘Qualifying Nuptial Agreements’ (QNAs) should be introduced, set out the conditions to be met and said they should only be interfered with to address the needs of a party or child, if the QNA did not adequately do so.
The Law Commission’s scoping report reinforced its recommendations from their 2014 report but were clear that before the Government addresses the question of binding nuptial agreements, they would first need to decide whether it wished to undertake wider, wholescale, financial remedies reform.
The Law Commission repeatedly recommends more clarity is needed for both us practitioners and clients.
Much like how the law requires reform and review, especially as our primarily legislation is now over 50 years old, and query if it remains fit for purpose, akin to this is the question ‘is your client’s prenup fit for purpose?’.
Marriage evolves and so should your pre-nup?
The Law Commission’s consultation paper No 198 proposed that a review clause should be used in a QNA if the agreement’s scope was wider than non-matrimonial property. One of the challenging aspects of drafting PNAs is that we are ‘crystal balling’ and attempting to predict what may happen in the future and protect the parties against such. The Law Commission suggested that a review clause is used to try to anticipate future events that may be relevant to certain clients. It was suggested the following events may trigger a review clause:
- Birth of a child.
- Serious disability of either party.
- Bankruptcy.
- Significant loss of value in a business.
- Significant loss of value in asset.
The Law Commission states that a review clause may be dangerous if the agreement specifies that it will terminate if not reviewed in accordance with the review clause. If the parties forget to review the agreement, they may subsequently find that it no longer stands. To guard against this, review clauses should include a provision confirming that the agreement will remain as drafted if there is a failure to review its terms.
Review clauses are still a useful tool in many cases. This is particularly true where the agreement tries to provide for the parties’ financial needs, as significant changes in circumstances like those listed above may result in needs no longer being met. While a QNA cannot irrevocably deal with financial needs, which will still be considered by the court, if the agreement is so out of date its terms are far removed from the parties’ current circumstances, the parties will have less control over the division of their finances, as the court may pay less regard to the terms of the agreement. However, if an agreement is not attempting to deal with financial needs and is, perhaps, ring-fencing one particular asset, a review clause may be unnecessary.
The clear benefits of a review clause are:
- Flexibility over time: circumstances can change, wealth can grow, children might be born, and one partner might stop working. A review clause allows the prenup to evolve with life changes.
- Fairness and goodwill: Including a review clause can signal fairness and emotional goodwill, which can strengthen the relationship and reduce any resentment of the introduction of the PNA.
- Avoid future challenges: courts are more likely to uphold a PNA if it’s reviewed and reaffirmed periodically, especially after significant life changes.
However, reviewing an agreement is expensive compared, for example, the cost of reviewing a Will, and couples are often reluctant to invest the time and money to do so during a happy marriage. It may also trigger emotions that were initially brought about by one party suggesting the introduction of a PNA.
If you are acting for the financially stronger party, it may be that you push back on such a clause being included because:
- Stability and certainty: if they want certainty and finality, a review clause might introduce unwanted negotiation later.
- Risk of concessions: future reviews might lead to renegotiation under pressure (e.g., emotional or familial), potentially resulting in less favourable terms.
- Legal strategy: some may prefer a prenup that “locks in” terms to avoid giving their partner an opportunity to change or invalidate it later.
Ultimately, as is with our discretionary legal system, and in the absence of any further clarity from the Government, much depends on whether parties prioritise flexibility and fairness or certainty and control.
When will there be clarity and when will the Government take action?
