Nuptial Agreements – Can they be changed?
It was reported in The Guardian on Saturday that a soon to be published book has made the claim that Melania Trump delayed moving into the White House when Donald Trump became President because she was renegotiating her pre nuptial agreement.
What does it mean in this jurisdiction to “renegotiate” a pre nuptial agreement and why might someone do it? And why might big, life changing events put the renegotiation of nuptial agreements in the spotlight?
Whether the reported story about the Trumps is true or not, if we are heading for a Covid-19 recession deeper and darker than the Economy has known since the Great Depression, should people be checking their prenups?
A prenuptial agreement is an agreement entered into before the marriage which states what the parties intend to happen if the marriage breaks down. The main focus is usually finances. (See our Whistle Stop Tour of Pre-Nups).
People who are already married can enter into a Post-Nuptial Agreement, which serves the same purpose and is equally – some may say even more – valid.
Either of these types of Nuptial Agreement can be amended at any time as long as both parties agree and the amended document complies with the basic rules as follows:
- Independent advice
- Disclosure (Updating)
- No duress or pressure
- Qualifying Agreement
Thus in order to change a Nuptial Agreement it must be done through a renegotiation in which both sides have proper input.
A Nuptial Agreement cannot predict everything which will happen in the future. A key reason for revisiting a Nuptial Agreement is the birth of a child.
More commercially speaking however, different classes of assets behave differently and have different associated risks. Times of significant economic turmoil may change the value of certain assets to the point where the purpose of the original Agreement is no longer being served by it – and this might be a good reason to revisit it.
A couple entered into a perfectly sensible pre nuptial agreement 10 years ago which said essentially that in the event of separation, Wife would keep her shares in an airline worth around £500,000 at the time and Husband would keep his shares in a pharmaceutical company worth around £1M at the time and they would share equally any jointly acquired assets, such as a house purchased together. As it turned out, the couple never purchased any joint property and the Wife’s airline shares have tanked in value to only £50,000 whilst the Husband’s pharmaceutical shares have been driven up to a value of £2.5M by a promising vaccine trial. If they were to separate tomorrow, on the face of it the Husband would do well out of this agreement, wouldn’t he?
In reality, it is probably time for both parties to review this agreement. The agreement now provides for a bad deal to the Wife but it may also have become unenforceable for lack of fairness and that is a problem for the Husband in this example. The Court has the power to declare a pre nuptial agreement unenforceable either in part or in whole because the outcome it provides for is simply too unfair. In other words, the Court might just declare the whole thing unfair and rip it up, thus, ironically, depriving the Husband of any protection. Accordingly, both parties have something to gain by renegotiating the terms.
What to look out for
We all hope for a “V” shaped recovery to the current economic situation but the economy has been hit hard by Covid-19 and certain industries more than others. If you have a nuptial agreement which provides for one party to receive assets disproportionately in vulnerable sectors such as restaurants, bars or theatres whilst the other party receives more “copper bottomed” assets such as real property or cash, it might be worth dusting it off and asking the fundamental question, “Is this still fair?”
In more general terms, a Nuptial Agreement should always be reviewed when the parties have a child or there is a significant change to the parties’ financial situation such as an unexpected inheritance. But neither of these things have as much potential to fundamentally undermine the effectiveness of a Pre-Nup as an extreme economic event. Or possibly becoming President of the United States!
Paradigm Family Law have a team of experienced lawyers to help guide you through the process of divorce, just waiting to hear from you.
If you would like more details on this or want to discuss your family law matter, please do not hesitate to contact James, Frank, Evelyn or Paul. Paradigm Family Law offers a free initial consultation and our fixed fee solutions cover financial proceedings from start to finish. You can call us on 01904 217225 or email us to [email protected].