16th Nov 2016

Confidential Pre-nuptial Agreements - Do they work? A warning!

I was recently instructed by a client to prepare a pre-nuptial agreement. The other party was uneasy about this and at our initial meeting to discuss what such an agreement encompassed he referred me to “confidential pre-nuptial agreements” (also known as “secret pre-nuptial agreements”).  He had been researching on the internet and was certain that he had found a much better solution.

Looking online, the advice I found was unregulated not offered by solicitors or expert financial advisors 

I agreed that I would look at them and 'googled' the term later that day. This led me on to several interesting websites but I became hugely concerned. The 'sites that I was looking at were unregulated companies and weren’t solicitors and don’t even appear to be financial advisors. This means that their activities are not checked and regulated by bodies such as the Solicitors Regulation Authority or the Financial Services Authority – with the protection that brings to the general public. The statistics they quoted were factually incorrect and they were making big emotive claims and wide generalisations unsupported by any form of evidence. Cleverly they claim that very few solicitors or barristers have the “specialised” knowledge to prepare these documents so that a prospective client’s existing solicitor or advisor may not know about them. This covers them when that client is told by his existing lawyer - rightly - that these schemes are ineffective.

The statistics quoted were factually incorrect and they made emotive claims and wide, unsupported generalisations

Let me be clear, my opinion is that a “confidential pre-nuptial agreement” is not a guarantee that your assets will be protected on a divorce as these companies claim. It seems to me that what is being proposed is some form of Asset Protection Trust. However, the courts have power to vary or alter any such settlements or trusts under Section 24 Matrimonial Clauses Act 1973. The effect of this is highlighted in the case of Charman in 2006 when the Court took the view that assets placed in a discretionary trust for the benefit of the husband would be regarded as assets that were available to him and would be brought into account by them when dividing the rest of the matrimonial pot.  The Court might not be able to ignore the fact that a Trust exists - which is what these firms rely on -but they can and will give judgments on the basis that the trusts are in reality a sham and that the spouse in question has control and use of the assets contained in them. They are far from the complete answer that these websites claim.

If you are considering a pre-nuptial agreement get proper legal advice from a regulated firm

If you are considering a pre-nuptial agreement get proper legal advice from a regulated firm. The Courts have indicated that a standard pre-nuptial agreement is likely to be accepted and followed as long as various guidelines are followed. The Court will only overturn a normal pre-nuptial agreement freely agreed between the parties if they consider that the result is ‘unfair’ and this is only likely to be if there is a drastic unforeseen change of circumstances. A court will start from the position of “why should we interfere in an agreement that has been freely reached between the parties”?

My concern remains however. The Solicitors Regulation Authority has recently suggested proposals that would involve splitting the profession. They propose that there will be a lesser qualification that some legal firms could opt for. They would be unregulated and thus free to make some the incorrect and misleading claims that I saw on the websites I looked at. This is very dangerous for clients who currently have the protection of a properly and fully regulated profession and all that that means. This current case illustrated the dangers to me. 

After all, how could a non-lawyer know any better? The websites, on a first glance, look very convincing and compelling. Despite what a former government minister said recently experts do know what they are talking about and members of the public need the protection of a properly regulated profession. The internet can be a dangerous place to rely on!

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