The importance of a carefully curated pre-nuptial agreement
The recent case AH v BH has brought attention to the practical implications of pre-nuptial agreements on finances upon separation. The case highlights the importance of drafting pre-nuptial agreements with care, and most significantly, the impact of review clauses and how adherence to the same can impact the implementation of an agreement in the event of a dispute.
AB v BH [2024] EWFC 125
Background
AH v BH was a case involving substantial assets, particularly those held in the husband’s name. The family home was owned in the husband’s sole name. The wife contributed to costs and renovations of the family home with some of the proceeds of sale of her former flat. The parties shared a short marriage, under 6 years, during which they had two children together, aged 2 and 4 years at the time of separation. Post-separation a Child Arrangements Order had been made by consent, under which the children were to spend 4 nights with the husband fortnightly during term time, and part of the school holidays.
The pre-nuptial agreement
Under the agreement, properties held in joint names were to be shared equally, claims were not to be made against properties in parties’ sole names and the wife was not to make a claim against the husband’s lucrative business. Spousal maintenance was not provided for.
The pre-nuptial agreement considered the differing provisions that should be made according to factors such as the length of their marriage and whether the parties had children together.
The parties agreed that the terms of the agreement considered their future reasonable needs. The pre-nuptial agreement provided for review upon the birth of the parties’ first child in order that the parties may re-examine the terms of the agreement in the light of the change in circumstances. It is important to note that the agreement was not reviewed after the birth of their first child.
The judgement
Upon receiving notice of the wife’s intention to proceed with application for a financial order, the husband issued a notice seeking implementation of the pre-nuptial agreement, however the wife wished for it to be disregarded on the basis that it did not reasonably meet the financial needs of herself and the children. The wife argued that the agreement should be departed from to the extent necessary to meet their needs.
The judge looked at a few important things. These included the needs of the children, the impact of the marriage on the wife, and a part of the pre-nuptial agreement. This part said that the agreement should be reviewed when their first child was born. This suggests that the couple believed the agreement might not be fair after that. The judge looked at a few important things. He considered the needs of the children. He also thought about how the marriage impacted the wife. Additionally, he reviewed a part of the pre-nuptial agreement. This part said that the agreement should be checked again when their first child was born. This suggests that the couple believed the agreement might not be fair after that.
The Court’s decision
The judge decided to depart from the terms of the pre-nuptial agreement as far as required to satisfy the reasonable needs of the wife and the parties’ children.
The judgement references that the wife’s award would have been greater had the parties have not signed the pre-nuptial agreement, and quite substantially so, even after the adjustment made by the court to account for her needs and those of the children. In this respect, AH v BH highlights the difference a pre-nuptial agreement can make for a party seeking to protect pre-acquired wealth, even where it is not upheld in its entirety.
The judgement does however also raise the question of what would have been ordered had the parties reviewed the terms of the pre-nuptial agreement on the birth of their first child.
Although the recording of the intention to review the agreement held weight for the judge, it was also noted that he could not recall a case in which the primary carer of children had not received a lump sum to meet housing needs and in this case the husband would have struggled to raise the sum from his non-business capital without the sale of the family home held in his sole name.
AH v BH highlights the role that pre-nuptial agreements can serve in protecting pre-acquired wealth when carefully drafted and thought out.
Additionally, the case emphasises the importance of reviewing pre-nuptial agreements to ensure that they are still effective and continue to accurately reflect the wishes and needs of the parties. Such review narrows potential for conflict and could make the difference between settling and going to court in the unfortunate event of a separation.
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