All You Need is Love (and a Pre-Nuptial Agreement)
As Paul McCartney found out, sometimes love isn’t all you need. So how can you ensure your assets are protected if your marriage breaks up?
Pre-nuptial agreements are becoming more popular in Ireland since the legalisation of divorce in 1996, particularly amongst parties who are marrying for the second time. Pre-nuptial agreements are, as the name suggests, entered into and signed prior to marriage enabling couples to mutually decide the distribution of their assets. Although these agreements are not legally binding there are a number of factors which influence the weight attached to them by the Irish Courts.
The aim of these agreements (along with the ante nuptial agreement) is to provide a solution in the event of a breakdown of marriage or upon the death of one spouse. Parties therefore usually before their marriage, agree to the distribution of assets in the event of their marital breakdown. The content of each prenuptial agreement varies such that they may also agree to other matters such as custody, pensions and the renunciation of rights. For example, a spouse may renounce their right to maintenance or their legal share right1, as per section 113 of the Succession Act 1965.
Unlike the majority of European and common law jurisdictions pre-nuptial agreements are not automatically recognised or legally binding in Ireland. In fact they are neither expressly allowed nor forbidden by our legislation. As a result, the court when considering the grant of ancillary relief2 is not obliged to give effect to pre-nuptial agreements.
So how can you ensure your assets are protected if your marriage breaks up? However, an agreement may act as guidance in judicial separation or divorce proceedings and may often be referred to so as to give a guide to the Court as to the intention of the parties when they entered into the marriage. However the Court can look beyond the terms if they deem appropriate and do not have to take the terms into account at all.
To date there has not been much case law in Ireland dealing with the significance of pre-nuptial agreements. They have been raised from time to time in the context of Separation or Divorce cases however there has been no particular case that refers to prenuptial agreements nor are there any guidelines for the Court to follow. It could be said from Irish case law that pre-nuptial agreements have persuasive effect only. However, there have been a number of relevant cases in the United Kingdom, which are persuasive authority here, indicating the approach the Irish Courts may take.
In the case of MacLeod v MacLeod3 it was found that
“the court should give effect to a nuptial agreement that is freely entered into by each party with a full appreciation of its implications unless in the circumstances prevailing it would not be fair to hold the parties to their agreement." The fairness of an agreement is determined by Courts on a case by case basis. This allows the Court to use their discretion based on the facts of the case. However, some guidance as to ‘the approach that a court considering ancillary relief should adopt towards an ante-nuptial agreement between the parties’ has been provided in the English Supreme Court case of Radmacher v Granatino4.
In Radmacher the Supreme Court found that pre-nuptial agreements can have “decisive weight” after consideration of the following:
- if there is a minor in the family (as their welfare must be provided for)
- what non-matrimonial property existed at the time of agreement and what exists now
- circumstances at the time of the agreement and any subsequent change in circumstances
- whether each party is currently in a position to meet their needs
- the terms of the agreement, including whether proper provision for both spouses is made
- whether any vitiating factors5 or unconscionable/unworthy conduct are present
- the parties’ emotional states at the time of the agreement
The Court expressly agreed that the old rules, which considered pre-nuptial agreements as contrary to public policy, are now obsolete. The Court will try to respect the individual autonomy of the couple, respecting that they are free to make their own decisions on what they believe is best for them. However, questions have arisen as to the contractual nature of the agreements which would be binding and enforceable by the Courts in another context. Even if the agreement does not have contractual force, some factors will negate any effect the agreement might otherwise have.
It was therefore suggested in Radmacher that a number of precautions can be taken by parties to help ensure that the Courts will regard their agreement and afford appropriate weight to such. These precautions are similar to those recommended by the study group formed by the Irish Government in December 2006, tasked with making recommendations for the change considered necessary6.
The precautions are as follows:
- the receipt of independent legal advice by both parties (which is particularly persuasive)
- proof that the agreement was entered with informed consent because for ‘an ante-nuptial agreement… to carry full weight, both the husband and wife must enter into it of their own free will, without undue influence or pressure, and be informed of its implications’7
- full and frank disclosure of any assets, property or liabilities of both parties
- proof that it was the intentions of both parties that the agreement be effective i.e. a signed acknowledgement that the pre-nuptial agreement would be legally binding
- the parties must have had time to consider the agreement (ideally not less than 28 days prior to marriage)
- the inclusion of a review clause providing for periodic reviews to accommodate for significant changes in wealth or circumstances, the birth of a child/children etc.
Without periodic reviews the Court will most likely disregard the pre-nuptial agreement on the basis that it is no longer relevant to the circumstances and position of the parties. Therefore, the shorter the marriage duration the greater possibility that the agreement will be noted.
The legal uncertainty surrounding the status of pre-nuptial agreements has been subject to scrutiny with many requests, from both the legal profession and general public, for reform and legislative intervention.
as highlighted in the case of Paul McCartney and Heather Mills. There is potential that the Study Group’s core recommendation will be implemented so that separate provision is made in both the Family Law Act 1995 and Family Law (Divorce) Act 1996 to provide that the courts regard existing pre-nuptial agreements when making ancillary relief orders. The recent Children and Family Relationships Act 2015 may further support the need for such provision as it is clear that Family Law is attempting to keep up legislatively with the changes in how families and couples live their lives on a daily basis and it is not only the traditional marriages that the legislation now seeks to protect.
Although many do not see pre-nuptial agreements appropriate when entering a life-long commitment with their partner choosing to forgo a pre-nuptial agreement may not be the best option for the wealthy couple, as highlighted in the case of Paul McCartney and Heather Mills. After a relatively short marriage of 5 years Heather received a substantial percentage of the combined assets and a generous monthly maintenance allowance from Paul, much to his disadvantage.
Until legislative intervention occurs one cannot be certain as to what extent the Court will regard pre-nuptial agreements, or whether they will consider them at all. But if the above precautions are taken the agreement will most certainly be more persuasive than not in this jurisdiction.
Copyright © Emma Fleming, McKeever Solicitors, 19th May 2016
This article is a general review of the law on the subject and is not intended to be a complete statement of the law. Specific legal advice must be sought on a case by case basis. For further information please contact Cliona Costelloe or Emma Fleming.
1 A legal right share of a spouse is their automatic entitlement to a share of the deceased spouse’s estate regardless of whether there is a valid will. If there is no children the surviving spouse is entitled to 50% of the deceased’s estate. If there are children the surviving spouse is entitled to 1/3 of the estate.
2 Financial relief following the petition for judicial separation or divorce
3 [ 2010 ] 1 AC 298
4 [ 2010 ] UKSC 427
5 For example duress or undue influence
7 Radmacher v Granatino para 68