With Divorce on the increase in Ireland it is not surprising that more young couples entering into marriage are considering looking at entering into a Pre-Nuptial Agreement to plan for any potential marital breakdown in the future.
Pre-nuptial Agreements are becoming increasingly popular among many couples especially from a farming background. Farms are a major issue when it comes to marriage and divorce due to the fact that the land can be a high asset value of up to several million and also by reason of the family inheritance aspect. A young man/lady inheriting the family farm tend to feel a great responsibility towards the land and towards their family to maintain the land and farm in the same condition and value as when they inherited it and to be in a position to pass the farm onto the next generation.
Typically the public view may be that it is the parents who are putting pressure on the young person to enter a pre-nuptial agreement with the young farmers fiancé however I have found in many cases it has nothing to do with the parents, the young farmer feels a great responsibility to protect the farm that he/she has inherited and to ensure that he/she will be in a position to pass the farm onto the next generation in the same if not better condition, value and size as when they inherited it from their parents.
What is a pre-nuptial agreement?
It is an agreement or contract entered into between two individuals who intend to marry setting out how the assets of the couple will be divided between the parties should the marriage subsequently come to an end. These agreements attempt to protect the assets that each party brings with them to the marriage and or an attempt to plan for the division of assets in the case of divorce proceedings to determine the division of assets owned prior to the marriage and those assets acquired during the marriage.
The legal status of a pre-nuptial agreement:
Currently there is no Irish legislation surrounding per-nuptial agreements and their enforceability in Irish Law. There is nothing in Irish Law which obliges the Court to enforce a Pre-nuptial Agreement. Equally however there is nothing in Irish Law to prevent persons entering into marriage from signing a Pre-nuptial agreement. Their enforceability will have to be determined on a case by case basis by the Courts in Ireland.
A study group on Pre-nuptial agreements was established by the Government in December 2006. The aim of the group was to study and report on the operation of the law since the introduction of divorce in 1996 with respect to pre-nuptial agreements. The group concluded that that such agreements do not offend against the constitutional protection afforded to marriage in the Irish Constitution. However there is a constitutional requirement on divorce that there be proper provision and the date of assessment of such proper provision may prevent pre-nuptial agreements from being automatically enforceable in Irish Law. The constitution places foremost importance on proper provision being made for spouses and dependent family members and this requirement for proper provision will outweigh any pre-nuptial agreement.
The study group recommended:
- that pre-nuptial agreements be allowed to be analysed by the court in the way that prior separation agreements are currently dealt with on divorce
- that the courts be required to have regard to existing pre-nuptial agreements when making ancillary relief orders in judicial separation and divorce
- that pre-nuptial agreements be reviewable on death and that a definition of pre-nuptial agreements be inserted into the Family Law Act 1995 and the Family Law Divorce Act 1996.
This definition would require that to be enforceable an agreement must be:
- in writing
- signed and witnessed
- made after each party has obtained independent legal advice
- made with full disclosure of all financial information of both parties
- and made not less than 28 days before the couple intend to marry.
The group’s recommendations have not however been enacted into Irish Law to date.
Despite the fact that pre-nuptial agreements have no legislative or statutory basis in Irish law the current opinion among the legal profession is that such agreements in the case of a breakdown of a marriage can be of assistance and can be referred to as a guide to the distribution of the assets of the marriage provided the Judge considers that the agreement was made fairly and that the interests of both parties have been looked after.
The legal profession believe that to be considered by a court the following essential requirements should be fulfilled by both parties:
- both parties receive independent legal advice concerning the effect of the agreement on the breakdown of the marriage and the division of the assets of the parties
- full disclosure of each of their financial assets and liabilities, honesty is important here so that the agreement can be drafted as fairly as possible and the distribution of the assets can fairly be determined
- sign an acknowledgement that the agreement is to be legally binding
- time for consideration, the parties must give themselves time to consider the agreement, three months is recommended however approximately six weeks would be sufficient
The agreement will be approximately in or around 10 pages, 4 pages approximately setting out the financial assets and liabilities and the remaining being the legal terms and conditions of the agreement. The agreement will specify the following:
- the length of the pre-nuptial contract
- division of present and future property and what will be considered separate property and jointly acquired property and the division of same
- succession act rights
- lump sum payments
- indemnity for debts
- proper law and jurisdiction
Any couple considering a pre-nuptial agreement should be advised by their Solicitor firstly that at the present time they have no legal basis in Irish law and therefore may not be enforceable. The paramount advice to a client would be to speak with their partner and be honest with him/her as to why they wish to enter into such an agreement. They should relay their concerns and reasons for feeling they need to enter into a pre-nuptial agreement to their partner. The couple should attempt to agree the terms of the agreement between themselves in consultation with their Solicitors and have full and frank discussions between themselves and attempt to agree all matters to the satisfaction of both of them.
Neither party should feel pressurised into signing the agreement. I believe only the couple should be involved in the consultation process to ensure that neither party is brow beaten into agreeing to terms or details which they are not happy with. The parents and parents in law should not become involved otherwise it may be viewed that either or both parties to the agreement may have been pressurised into signing the agreement.
It is very important that both parties are happy with the agreement and happy with the consultation process otherwise one of the parties may not agree to sign the agreement when same is drafted, purely as a result of dissatisfaction with the consultation process and approach taken to the process.
There are clauses which will require more consideration than others namely:
The review clause may cause issue with some parties as many view the pre-nup as a document that is signed prior to the marriage and left in a bottom drawer and not looked at again unless or until there is a marital breakdown. Couples should however be encouraged to insert a review clause possibly every five years or so to ensure that the agreement is kept up to date with any changing circumstances.
- Maintenance is another clause that may raise some concerns as many templates attempt to state that neither party will claim maintenance in the event of a break up. This clause needs serious consideration as both parties on entering the marriage and signing the agreement may be in full time employment, one on the farm and one outside the farm. In the future on the arrival of children one or other of the parties but it is typically the wife may decide to only work part –time or may decide to give up work altogether outside the home and farm for the benefit of the family. If this decision is made for the benefit of the family, and the couple then down the line divorce, and the wife has waived her right to maintenance then she could be left with no possibility of earning an income as she has given up her job outside the home for the benefit of the family. Therefore parties need to look to the future when drafting such an agreement and agreeing the terms of same.
- Separate property and joint property clauses, the couple must consider what property they wish to form part of what is termed separate property and what will be considered joint property and who will benefit from the income derived from the separate and joint property or whether all income will be joint income.
A couple considering a pre-nuptial agreement should consult their Accountant to obtain up to date and accurate financial information and to obtain appropriate financial advice with regard to same.
The couple must consider what property they wish to form part of what is termed separate property and what will be considered joint property and who will benefit from the income of the separate and joint property.