By Euan Davidson
27th February 2014
Today’s Law Commission report (see https://www.lawcom.gov.uk/app/uploads/2015/03/lc343_matrimonial_property.pdf) makes interesting reading for anyone involved in the family law arena as it finally opens up the possibility that pre-nuptial agreements (i.e. financial agreements drawn up before a marriage) might become legally binding if the Government accepts and implements the recommendations of the report.
Whilst anecdotal evidence suggests that pre-nuptial agreements have been becoming increasingly popular over recent years it appears that they have primarily been the domain of wealthy clients who feel that they have assets worth protecting and who have been able to afford to spend money on creating the agreements. I suspect that the recommendations in today’s report will open up a much larger market in pre-nuptial agreements, with far more solicitors and mediators then looking to provide services in the market, which should in turn make the agreements cheaper and easier to prepare as well further pushing the use of pre-nuptial agreements into the mainstream.
Of course, it is also possible that the Government will ignore the report’s recommendations and simply leave the current situation that essentially means that properly prepared pre-nuptial agreements are likely to be considered as legally binding by the courts but with judges having the discretion to ignore some or all their contents but subject to the growing body of case law.
Essentially the report recommends that provided that both parties have followed a robust preparation process then the contents of pre-nuptial agreements should become legally binding with the court then only having the power to ensure that all parties, especially any children of a marriage or civil partnership, have their future financial needs met. In reality, this is likely to mean that the majority of people will still not be affected by these changes as it is rarely the case that both parties of a broken marriage can actually afford to run their own homes and pay all their day to day expenses, especially when there are children to support.
However, there will be a significant number of clients who will have access to more capital and/or income than is necessary to cover their future financial needs and it is these clients who will have further freedom to create legally binding agreements before entering into a marriage. This might be to protect pre-marital assets or expected future inheritances or it might simply be to start the relationship on the basis that there will be little if any element of joint finances.
Whatever the reason behind the decision to create a pre-nuptial agreement, as a mediator I can see that the process is essentially the same one that is currently required to reach a robust financial settlement on divorce i.e. access to legal advice, full financial disclosure and a properly drafted and legally effective document to record the agreement. The main difference is that rather than having to deal with the mixture of negative emotions that tends to surround financial discussions upon a divorce, there are likely to be feelings of uncertainty and awkwardness about working on a “what if it all goes wrong” scenario before the marriage has even started but there will generally be far few barriers or potential deal breakers prior to a marriage than at the end of the marriage.
Personally, I think that this makes mediation an excellent way for both parties to undertake their financial disclosure and negotiate the terms of the pre-nuptial agreement and I really do hope that mediation ends up playing a significant role in most pre-nuptial agreements in the future, with solicitors advising and drafting the final agreements as part of this process. After all, it will not really be possible for one party to claim that they are too frightened or nervous to sit in the same room as the other person or to argue that communication has broken down to the point where direct discussions are not possible and it is very unlikely that the threat of court action will be looming over the process. Mediation offers a fantastic way for both parties to conduct these discussions in as amicable a transparent a way as possible which must surely be the most sensible way to embark on a serious, some would say lifelong, commitment together?
Thank you for taking the time to read this post and I look forward to reading your comments.
Godalming Family Mediation