When planning a wedding and future together, divorce is the last thing on a couples’ mind. But with around half of all marriages ending in divorce, more and more people are opting to draft up a prenuptial agreement before getting married, and for good reason.
Divorce can be an emotionally and financially draining time, so deciding how to divide your resources, at a time when you are both working towards shared future goals, can save a lot of stress if you later decide to divorce. Prenuptial arrangements can also help to provide clarity and security. It is a bit like insurance – even though one hopes they’ll never need to rely on it, it provides certainty and financial protection if things don’t go to plan.
What is a Nuptial Agreement?
A prenuptial agreement is a legal document entered into by each party before marriage that sets out how the couple intends for their assets and debts to be divided between them should they get divorced in the future. It will sometimes also include how the couple may wish to deal with their assets during the marriage. A post-nuptial agreement is essentially the same thing, but is entered into once you are already married.
When a Judge is considering how assets will be split in a divorce, the paramount consideration is the Matrimonial Causes Act (2005 Revision), which states that all the relevant circumstances of the case must be considered. However, in October 2010 the United Kingdom Supreme Court issued a judgment in the landmark case of Radmacher v Granatino [2010] UKSC 42. This judgment, although not legally binding on Cayman Islands’ Courts, is considered to be highly persuasive. Following Radmacher, prenuptial agreements now form part of the considerations for Cayman Courts.
For a nuptial agreement to be legally binding, it must satisfy the legal test set out in Radmacher. Key points include that each party: freely entered into the agreement without undue pressure; obtained independent legal advice prior to entering into the agreement; was informed of the full implications of entering into the prenuptial agreement; and if there was a full and honest disclosure of both of parties’ assets. The actual agreement must also be validly drafted pursuant to the laws in the jurisdiction where it is to be applied.
A nuptial agreement should also include a review clause, and should be reviewed whenever any significant change in the marriage occurs. For example, the birth of a child or the receipt of a large inheritance by one spouse could drastically change the terms of a pre-nuptial agreement.