5 July 2002

An agreement that could cut stress?

Divorces within farming

families are often complex

and stressful and a

settlement can take years

to work out. Could a

pre-nuptial agreement be

the answer in years to

come? Suzie Horne looks

at the increasing weight

being attached to such

agreements

PRE-NUPTIAL agreements may offer a civilised way of setting out what should happen to assets in the event a marriage fails. Although they are not binding in law in the UK, their status is changing.

Traditionally there has been a fear in farming families that divorce could force the sale of the farm and this fear has increased with decisions made in cases following the landmark judgement in White v White in October 2001.

Asset-rich families have sought to protect their interests where there is inequality of assets between parties to a marriage by using a pre-nuptial agreement, which sets out how assets are to be divided on divorce, only to be advised that these agreements do not offer the security they seek.

In several other European countries and in the US and Canada, their terms are enforceable and there is a growing recognition here that they may at least be considered by the court where a marriage fails, especially where that marriage is short and childless.

While it is not possible to contract absolutely out of the courts discretionary jurisdiction, says Gareth Schofield of Bristol solicitor Burges Salmons family law unit, pre-nuptial agreements can be useful in certain circumstances. They can demonstrate the wishes of both parties before the marriage as to how the assets are to be divided if the couple ever separate.

Supporting evidence

They may be used in court as supporting evidence to demonstrate these intentions. For instance, where a marriage is short and childless, it is often the courts intention that assets revert to their original ownership if the marriage fails. An agreement will assist in identifying these assets.

"Both parties can then move on without significant detriment," says Mr Schofield.

"The courts attitude to pre-nuptial agreements has changed in the last few years. In a 1995 case, it was considered that they would be of little significant value. However, in another divorce case in 1999, the court made clear that while not specifically enforceable in English law, the existence of an agreement and its evidential weight were factors which would be taken into account. A more recent case has shown how they can affect the level of settlement.

"Case law is changing in other aspects of divorce law, with some judges now looking at treating assets acquired pre-marriage and by inheritance separately from those acquired by joint endeavour during the marriage. This would move the English divorce system closer to its European counterparts and here again an agreement is very helpful in identifying those assets."

No duress

For a pre-nuptial agreement to have any value, it must be made entirely freely, with no duress on either party. "Both parties must also have independent legal advice and it is also vital that the agreement is entered into before the marriage, which is not necessarily something which prospective newlyweds wish to consider in the run up to their marriage.

"There must also be full disclosure by both parties of assets and income," says Mr Schofield. "If the marriage fails and either party is found to have withheld information of this type, then the agreement would have no significant value."

The terms of the agreement deal with the distribution of assets in the event that the marriage fails. They also usually contain a clause to the effect that both parties will walk away with the assets distributed as the agreement provides and that each will make no further claim on the other party thereafter in relation to the marriage.

Drafts are negotiated and exchanged between the parties, final agreement is reached and then the deeds are signed and witnessed. Costs for pre-nuptial agreements vary from firm to firm and depend on the complexity of the issues involved, but Mr Schofield estimates that a basic agreement could cost from £500 plus VAT for each party.

In longer marriages, even where there are no children, it may be useful to have a pre-nuptial agreement, but there should always be provision for any such document to be reviewed at least once every five years or on the birth of a child.

The prospect of either party being likely to inherit significant assets may also influence the decision to draw up an agreement, which could result in considerable savings in a settlement at a later date. It is possible that legislation may be introduced in future to make pre-nuptial agreements directly enforceable.

Mr Schofield also points out that a will executed in the last 20 years is automatically revoked on marriage – unless the will was written at a time when the person was expecting to marry and the will makes it clear that it is not to be revoked on marriage.

On divorce, a will continues to take effect as though all references to the former spouse were omitted.

The divorce rate is highest between men and women aged 25-29. There were more than 141,000 divorces in England and Wales in 2000 compared with 268,000 marriages in the same year. Seventy per cent of divorces were between couples marrying for the first time – Office for National Statistics.

Deciding how the farm

assets will be split in the event

of divorce (above) could be

made easier by a pre-nuptial agreement at the outset (left).