It seems that the Law Commission are keen to correct some of the information swirling around out there. This press release arrived earlier this week, embargoed until now, with the subject line “what the law commission is really saying about pre-nups”. So, here you go. Unedited by moi :
Making it easier for separating couples to manage their finances and property
The Law Commission is recommending a set of measures to make it easier for couples to manage their financial affairs on divorce or at the end of a civil partnership. These are:
- guidance to help couples assess and agree financial needs
- an assessment of the feasibility of using formulae to help agree financial settlements, and
- “qualifying nuptial agreements” to allow couples to decide how their assets should be shared if they separate.
When married couples or civil partners separate, the courts in England and Wales have a wide discretion to make financial orders, including capital payments and ongoing maintenance. An important element of those orders is to ensure that the financial needs of both partners are met. The Law Commission believes that the objective of such orders should be to enable both partners eventually to achieve financial independence. That is already the outcome of the majority of cases, and there is no need for a change in the law.
However, there is evidence of regional inconsistencies in how the courts approach orders for financial needs, which can make the outcome unpredictable. And, while the law is largely well-understood by family lawyers, it is not clear to the general public who are increasingly dealing with the financial consequences of separation without legal assistance.
Agreeing financial needs
We are recommending that the Family Justice Council produce authoritative guidance on financial needs. The guidance would explain the outcome a judge would aim for in determining a settlement, including achieving eventual financial independence. This would enable couples to reach an agreement that recognises their financial responsibilities to each other. The guidance would also help to bring more consistency to how the law is applied in the courts.
Making settlements more predictable
Guidance from the Family Justice Council would provide an explanation of the sort of outcome that should be aimed for but it would not provide figures. The Law Commission is also recommending that the Government commission a long-term study to assess whether a workable, non-statutory formula could be produced that would give couples a clearer idea of the amounts that might need to be paid to meet needs. Formulae are already used successfully in other jurisdictions such as Canada, where they produce a guideline range of outcomes within which couples can negotiate.
Qualifying nuptial agreements
The Law Commission is recommending the introduction of “qualifying nuptial agreements”.
Qualifying nuptial agreements would enable married couples and civil partners to make a binding agreement about how their property or finances should be shared if their relationship breaks down. The agreements would be enforceable as contracts but would apply only after both partner’s financial needs, and any financial responsibilities towards children, have been met. And they would be binding only if, at the time of signing, both parties had disclosed material information about their financial situation and both received legal advice.
Under the current law, couples can make pre- and post-nuptial agreements. The courts may follow these agreements but they are not binding and the parties cannot be certain they will be upheld.
Professor Elizabeth Cooke, Law Commissioner for property, family and trust law, said:
“We believe that married couples and civil partners should have the power to decide their own financial arrangements, but should not be able to contract out of their responsibilities for each other’s financial needs, or for their children. The measures we are recommending would help couples understand and meet their financial responsibilities and, where appropriate, achieve financial independence.
“Pre- and post-nuptial agreements are becoming more commonplace but the courts will not always follow them and lawyers are therefore not able to give clear advice about their effect. Qualifying nuptial agreements would give couples autonomy and control, and make the financial outcome of separation more predictable. We have built in safeguards to ensure that they cannot be used to impose hardship on either party, nor to escape responsibility for children or to burden the state.”
The Law Commission’s report, Matrimonial Property Needs and Agreements, includes a draft Bill that, if implemented, would bring qualifying nuptial agreements into effect.