Pre-nups inheritance act claims

11th July 2019 9:41 am Comments Off on Pre-nups inheritance act claims

Rosita Hendry v Michael Hendry

This case involved a couple who met in 2001 in the Philippines and married in 2003.

Prior to marriage they entered into a pre-nup, whereby if the parties separated the wife would receive a lump sum payment of £10,000.00 in addition to the cost of a flight back home to the Philippines.

The marriage had broken down and the wife issued divorce proceedings in November 2016.  Despite the pre-nup, she claimed an equal division of assets in respect of the finances. Her husband passed away during the divorce proceedings in February 2017, and the divorce was therefore not finalised.

The main issues which come to light in this case are: –

  1. The significance of pre-nups – could the wife justify trying to overturn the agreement set out in the pre-nup?
  2. Could the wife have a claim for ‘reasonable financial provision’ from her husband’s estate?If so
  3. What are the timescales for bringing such claims?

 

  1. The significance of a “pre-nup”

Pre-nuptial agreements (commonly known as “pre-nups”) are not yet technically legally binding in England. This means that by entering into a pre-nuptial agreement, you cannot override the court’s ability to decide how your finances should be divided on a divorce. However, when considering an application for financial remedy, the court must give appropriate weight to a pre-nuptial agreement as a relevant circumstance of the case.

Following the Supreme Court decision in Radmacher v Granatino [2010] UKSC 42 in October 2010, the court will uphold a pre-nuptial agreement that is freely entered into by both parties with a full appreciation of its implications, unless in the circumstances it would not be fair to do so. Provided that each stage of the three stage test set out in that case is met, the court will give effect to a pre-nuptial agreement and so you should expect to be held to its terms. Looking at the three stage test:

  1. The parties must enter into the agreement of their own free will, without any pressure from each other or anyone else;
  2. The parties must have a “full appreciation of the implications” of the agreement – meaning the parties should be in possession of all the information material to their decision to sign the pre-nuptial agreement before signing it (this is why both parties should insist on having independent legal advice on the terms and the legal effect of the document);
  3. It must be fair to hold the parties to the agreement in the circumstances prevailing. If the effect of the pre-nuptial agreement would be to leave one party with less than his or her needs, while the other party is comfortably provided for, this is likely to be unfair. “Needs” are based on the amount a party needs to spend to maintain a standard of living not too dissimilar from that enjoyed during the marriage. If needs in this context and compensation are adequately covered in the provision offered in the pre-nuptial agreement, then further sharing of the assets is more likely to be prohibited.

As the law currently stands, pre-nuptial agreements are almost as good as binding, provided that they are fundamentally fair and both parties had independent legal advice before entering into the agreement.

A pre-nuptial agreement, however, will be only one of the factors considered when the court is exercising its discretion to deal with the parties’ finances. You should, however, expect to be held to its terms as you should assume the pre-nuptial agreement will pass the three stage test explained above.

  1. Claim for reasonable financial provision

The Inheritance (Provision for Family and Dependants) Act 1975 (“the 1975 Act”) allows family members and dependants to make a claim for reasonable financial provision from a deceased person’s estate where they have been left out of someone’s Will, they feel that they have not been left enough under the Will or have not inherited as a result of intestacy.

When a person dies without leaving a valid Will (or any Will at all!), their estate is distributed in accordance with the rules of intestacy. Making a valid will is therefore the ONLY way to ensure that your money is distributed to your loved ones in the way that you choose when you die.

Persons who are entitled to bring a claim under the 1975 Act include:

  • Spouse or civil partner
  • Former spouse or civil partner (who has not remarried or entered into a civil partnership)
  • Cohabitee subject to certain conditions
  • A child, adopted child or someone treated as a child of the family by the deceased e.g. a step-child
  • A dependant who was maintained by the deceased wholly or in part, immediately before their death

Once an application has been made, the court has the discretion to vary the distribution of the deceased’s person’s estate. The court will take into account a number of factors including the needs and resources of the person applying for reasonable financial provision and any other persons affected as well as the size and nature of the estate. Although there are certain provisions that must be followed, all claims are assessed on a case-by-case basis.

The key question in all claims is whether the deceased made reasonable financial provision for the applicant. The test for this is slightly different depending on whether the applicant is a spouse or civil partner or a person from one of the other categories.

A recent Supreme Court decision concluded that the test for reasonable financial provision is an objective one and looks at whether the outcome for the applicant is reasonable in the circumstances and not whether the deceased acted reasonably. The burden to prove the claim is on the applicant.

If the claim is made by the spouse or civil partner the court will also consider the age of the spouse or civil partner, the duration of the marriage or civil partnership and the contribution made by the applicant to the welfare of the family. The court will also consider the ‘deemed divorce’ test i.e. what the applicant would have received had the marriage ended on divorce rather than on the death of one of the parties.

  1. What are the timescales for bringing such claims?

Court proceedings must be issued within six months of the date of the Grant of Probate. It may still be possible to bring a claim after six months but the court’s permission must be obtained to apply out of time and such permission is only granted in exceptional circumstances. In the article referred to above, although the judge commented that the wife had “an arguable case”, the case was not allowed to proceed because it had been made outside the six month time limit and the court did not grant permission for the claim to be brought outside the limitation period.

This case therefore highlights how vitally important it is to act quickly and take specialist legal advice if you think you may have a claim.

This article was written by Denise Bullock and Kiran Panaich of Colemans Solicitors LLP. Denise is a Family Law Solicitor with over 10 years of experience. She specialises in all aspects of Family Law including pre-nuptial agreements, post-nuptial agreements, divorce, finances and children matters.

Kiran qualified 4 years ago and specialises in Private Client Law including the drafting and execution of Wills, Lasting Powers of Attorney, administration of Estates (also known as Probate) and Court of Protection work.

If you have concerns about any of the issues raised in this article, or for more information on how to protect your personal wealth generally, call Denise or Kiran on 01628 631051 for an initial discussion or to make an appointment. For more information about Denise or Kiran or the topics covered in this article please also visit our website www.colemans.co.uk.


Categorised in: Family Law

This post was written by Colemans Solicitors LLP

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