Pre-Nuptial Agreements like ‘fire insurance’

The lawyer for Katrin Radmacher, a German heiress, likened pre-nuptial agreements to fire insurance, saying ‘it was far better taken out before the event than after it’. He said ‘couples can decide, in the best of times, what the outcome should be in the worst of times’.

On 20th October 2010, the Supreme Court decided that Mr Granatino should be held to the pre-nuptial agreement he and his wife had entered into prior to their marriage in 1998. This meant that instead of Mr Granatino receiving £5.8 million awarded to him by the first Court, he should receive a sum of £1 million.

The agreement they signed prior to their marriage, stated that if the marriage failed, he would make no claim against her assets nor she against his. The Judge in the Supreme Court described her as ‘very rich’ at the start of the marriage and the husband as ‘quite well off’. Her wealth increased as a result of inheritance, he had voluntarily given up his highly paid job and became a student.

When they divorced he claimed more, contrary to the agreement. Pre-nuptial agreements are common in many European countries and are binding but have not been so in England and Wales. It had been felt that they undermined marriage and some events may arise after the agreement such as the arrival of children which may make a pre-nuptial agreement unfair.

The Judges decided they would recognise the agreement if it had been freely entered into with both fully appreciating the implications, unless in the circumstances at the time, it would not be fair. In this case they felt it was fair as the agreement reached on separation, catered for the children’s needs and Mr Granatino had had the opportunity to have legal advice. It had also been agreed that the wife would provide the husband with £2.5 million to house him and the children but the property will go back to her when the children are adults.

In summary a couple are likely to be bound by a pre-nuptial agreement as long as the couple have each taken legal advice and considered the terms of the agreement well in advance of the marriage; have each given the other full details about their finances and have entered into the agreement freely, without pressure. This is particularly so where it caters for the arrival of children. If not, and it would be unfair to uphold an agreement where there were no arrangements made for children or other relevant events that had not been taken into account, it may not be binding.

If the agreement is then confirmed by the couple after a reasonable time into the marriage known as a post-nuptial agreement, the courts are even more likely to consider that the couple are bound by it.