Recent celebrity divorces, such as those involving pop star Britney Spears and actor Kevin Costner, have highlighted the use of prenuptial agreements in divorce proceedings.
Many people hear about nuptial agreements most often through sensationalised media reporting about them, which might lead you to think that nuptial agreements are only for the rich and famous. They aren’t, and more and more people in Bermuda are using nuptial agreements.
Nuptial agreements — commonly known as pre-nups if they are made before the marriage and post-nups if agreed during the marriage — are the equivalent of an insurance policy. Like insurance, you hope you will never have to rely on it, but a nuptial agreement can outline the division of assets and financial responsibilities in the event of divorce. It allows couples to determine how their property, investments, inheritances and business interests might be divided if the relationship breaks down. Nuptial agreements can also address such issues as spousal support and the allocation of debts, providing a comprehensive framework to resolve future disputes. Given that more than half of marriages end in divorce, it makes a great deal of sense to ‘hope for the best but prepare for the worst’.
Nuptial agreements have been legally recognised in the United Kingdom for some time, but their enforceability is subject to the discretion of the Court. They are not automatically binding, but they carry significant weight and can be upheld by the Courts. The Courts in Bermuda would likely take a similar approach and uphold an agreement that has been drawn up properly and is fair to both parties.
To ensure that a nuptial agreement carries as much weight as possible, it must be entered into freely by both parties after they have received independent legal advice. Both parties are also required to provide full financial disclosure of their assets and income before entering into the agreement. Additionally, a nuptial agreement must be fair when viewed against the parties’ financial circumstances at the time of the divorce.
It is important to consider the terms of a nuptial agreement carefully and obtain specialist legal advice, because the Court has the power to depart from the terms of an agreement in the event that any provisions are deemed to be unfair for one of the parties. Factors such as the length of the marriage, significant changes in the parties’ financial situations and the welfare of any children may be considered when determining the fairness and enforceability of an agreement.
In particular for Bermuda’s ex-pat population, there may be instances where a married couple move to Bermuda after having entered into a prenuptial agreement in another jurisdiction. In these cases, it is important that the parties obtain specialist legal advice about how the Courts in Bermuda may treat the foreign prenuptial agreement on divorce. If it is not likely to hold legal weight in Bermuda, the couple may need to consider entering into a postnuptial agreement in Bermuda.
Although not necessary automatically binding, nuptial agreements offer couples a valuable tool for establishing financial arrangements and protecting their assets in case of a relationship breakdown. It is important to remember that a well-drafted and fair pre-nup or post-nup, entered into with full disclosure and legal advice, can carry significant weight in court proceedings, protect wealth and assets, and reduce the risk of protracted (and acrimonious) argument in the event of a split.
Originally published 4 October in the Royal Gazette.