Picture of a person signing a contract

UK Nuptial Agreements Sense-Check: Will Someone Be Left in “Real Need”?

The meaning of “real need”, as interpreted by English courts in post-Radmacher divorce cases, is analysed by Joanna Blakelock and Kate Pooler, a partner and an associate solicitor at Edwards Family Law.

The Supreme Court case of Radmacher v Granatino [2010] 2 FLR 1900 still leads the pack for the validity of nuptial agreements. Upon divorce, the starting point is that all marital assets are shared equally, otherwise known as the “sharing principle”. Generally, the aim of a nuptial agreement is to “contract out” of the sharing principle and restrict financial claims on divorce to “needs-based” claims only.  

Suffice to say, the English court is not bound to uphold nuptial agreements as a “contract”. However, Radmacher established the presumption that the terms of a pre-nup will be upheld and approved by a court. It therefore falls to the party who does not want to be bound by the agreement to argue why its terms should not be followed.

So, what is “real need”?

Radmacher decided that if a nuptial agreement left a former spouse in a “predicament of real need” then it would probably be unfair to hold the parties to that agreement. “Real need” was interpreted at a very low level in Radmacher and only required that a spouse was not left “destitute”.

Since Radmacher there has been relatively little guidance from the courts about the meaning of the phrase “predicament of real need” and where there has been guidance, judges have taken a range of views in this discretionary area.

One view: Fairness will not equate to near destitution…

In the 2016 case of WW v HW (Prenuptial agreement: Needs: Conduct), the couple’s pre-nup stated that neither party would have any claim to the other’s pre-marital, gifted or inherited property on divorce. Their relationship lasted 12 years and they had two children. The only joint asset was the former marital home which was worth GBP4.5 million, to which the wife had contributed 86% of the purchase price. The wife had inherited assets of circa GBP27 million.

“Radmacher requires the court to consider the pre-nup’s fairness in all the circumstances of the case at the time of the divorce.”

The judge made clear that the husband’s claim was limited to needs (on account of the pre-nup) but was concerned the husband would be left in a “predicament of real need” if the terms of the agreement were upheld.

The judge questioned whether the husband’s needs should be interpreted as “the minimum amount that is required to keep him from destitution” and whilst he judged that the presence of the pre-nup itself reduced the parameters of a needs award, this was not to the point of only saving the husband from destitution. He awarded him a housing fund of GBP1.7 million on a lifetime basis (with 45% of this sum reverting to the wife in 2027); a capitalised income fund of GBP215,000; and child maintenance payments of GBP18,000 per child, per annum.

Normal “reasonableness” considerations are still relevant

In the 2018 case of KA and MA (Prenuptial Agreement – Needs), the wife advanced a needs-based claim for GBP6 million (the pre-nup would have resulted in an award of only GBP1.6 million). In total, the judge awarded her GBP 2.95 million.

The judge said that Radmacher requires the court to consider the pre-nup’s fairness in all the circumstances of the case at the time of the divorce, which included the wife’s contributions to the marriage, the standard of living the family enjoyed, and which the husband (and the children whilst with him) would continue to enjoy. The judge was very careful to avoid too great a discrepancy between the children’s standard of living with each parent. These are the kind of “needs” considerations that would be taken into account in a divorce in the absence of a pre-nup. The judge awarded the wife a capitalised income fund for life at a rate of GBP100,000 a year (albeit with a 25% step down when the parties’ child reached the age of 21 or completed tertiary education). It is noted that she would have ordered GBP150,000 a year had the pre-nup not existed, demonstrating the role of a pre-nup in constraining a “needs based” claim.    

Another view: a nuptial agreement should not markedly reduce a normal “needs” assessment… 

In the more recent 2019 case of Ipekçi v McConnell another judge took another view. The couple had a pre-nup which, if upheld, would not have left the financially weaker party (the husband) “destitute” on divorce, but would have meant that his financial situation would be seriously strained.

The wife was an heiress with beneficial interests in trusts in the United States worth around USD65 million. The judge went beyond Radmacher, stating that he did not think that a valid pre-nup should result in a needs assessment that is “markedly less than needs assessed in ordinary circumstances. If you have reasonable needs which you cannot meet from your own resources, then you are in a predicament.” In any event, the judge deemed that the pre-nup fell short of compliance with the Radmacher principles and decided not to hold the couple to its terms. The husband was awarded a lump sum of GBP1,333,500.

The law is still uncertain; protect yourself

There remains uncertainty and inconsistency in the exercise of judicial discretion when it comes to the interpretation of Radmacher.

Nonetheless, if the effect of the proposed terms is designed to satisfy the financially weaker party’s housing and income needs, taking account of a reasonable standard of living, then the terms are likely to be considered “fair” and will be upheld by the court. Put another way, if the pre-nup inadequately provides for the financially weaker party, the agreement is unlikely to be worth the paper that it is written on and could lead to costly litigation, which undoes precisely the certainty that is initially sought. It is important to get the balance right.

Nuptial agreements certainly have a place in today’s family law climate, serving an important function of certainty and security for both parties. It is crucial to take early legal advice on the personal circumstances of individual cases. Enough time should be left for sufficient disclosure to be produced and shared, for adequate advice to be provided to the financially weaker party, and for negotiations to take place.