‍Q: When my husband and I first met, he was significantly wealthier than me. Before we got married, he insisted we get a prenup. I was young and in love so went ahead with it. We have now been married for many years. I took time off work to raise our kids. Now that they have grown up, our marriage is feeling fragile. Looking back, I think the agreement I signed was incredibly unfair and would leave me with next to nothing if we separate. If our marriage does end, is there anything I can do to stop the agreement being enforced?

Answer: Prenups can be an effective way of protecting assets for your future, and the future of your loved ones. Before answering whether a prenup can be set aside, I will cover what a prenup is and why they are useful.

What is a “prenup”?

A prenuptial agreement is an agreement reached between two people in a relationship that sets out how relationship property will be divided if they separate. It is sometimes referred to as a contracting out agreement. This is because the parties are contracting out of the default position contained in the Property (Relationships) Act 1976 (“the PRA”) that requires relationship property to be divided 50/50.

 It is common for couples to enter a prenup when one party enters the relationship with more assets than the other. They may want to protect their assets for children from a previous marriage or because it was inherited from their parents. A prenup allows parties to specify what property will be considered relationship property and what will be considered the separate property of each party.

How long does it take to complete one?

Couples seeking a prenup often approach their lawyer a few weeks before their wedding, or when approaching the three year mark in their relationship. It is important to be mindful that it can take between 3-12 weeks for an agreement to be drafted and signed depending on the complexity of the property pool. For some people, a prenup will seem to be an unnecessary expense. However, when you consider that a prenuptial agreement can cover all property owned jointly and separately in the relationship, it can be a worthwhile investment.

How can I make sure a prenuptial agreement is not enforced?

A prenup agreement can be set aside where it causes serious injustice. Serious injustice can be found either at the time the agreement was signed or can appear later.
Either:

1.     It was unfair or unreasonable inlight of the circumstances at the time it was made, or;

2.     It has become unreasonable in light of changes in the circumstances since it was made.

Now, I’ll expand on how a prenup could be unfair or unreasonable at the time of signing or later, creating serious injustice.

The prenup is unreasonable at the time due to not following the formal requirements.

The prenup may not meet the formal requirements required by law. These requirements are in place to prevent spouses from entering into highly unfavourable agreements without knowledge of what they are signing up for.

For a prenup to be valid, it must be:

1.     in writing and signed by both parties;

2.     each party must have received independent legal advice before signing the agreement;

3.     each party must have their signature witnessed by a lawyer;

4.     the lawyer for each party must certify that before the signing, the lawyer explained to that party the effect and implications of the agreement.

An agreement being in writing, as opposed to it being verbal, further establishes the terms and makes sure that nothing is added to the agreement post signing. Because a prenup can have such far reaching consequences, independent legal advice is necessary to inform the parties of exactly what they are doing.

Unreasonable due to duress/undue influence

A prenup agreement is specifically tailored to relationship property. But, like any agreement, where you are compelled into entering it against your will, this immediately makes it unreasonable, and creates serious injustice. Your prenup may meet the formal requirements set in the PRA, and still be challenged on other grounds. If you can prove you were under duress or unduly influenced to enter the agreement, the Court can overturn the agreement.

Unreasonable due to any other matters the court considers relevant

Finally, the court retains discretion to set aside an agreement despite it having met the PRA requirements, and where there has been no duress or undue influence. It can do this in situations where the prenuptial agreement would cause serious injustice. In finding serious injustice, the court has the discretion to consider “anything it considers relevant.” This is to grant greater safety to those who would lose out due to an unreasonable prenup.

When can you challenge a prenup agreement?

The amount of time that has passed between the prenup being signed and the date the party approaches the court is a factor often considered by the courts. This is because as time passes after signing the agreement circumstances change, often in ways the prenup cannot anticipate. Couples could have children together or purchase new property. Where the changes in circumstances greatly benefit one party (one partner stays at home to raise children, the other continues to work), the prenup is more likely to be declared illegal.

The court can consider the terms of the agreement, how long ago it was made, whether it was unfair or unreasonable in the light of all the circumstances at the time it was made and if there has been a change in circumstances since it was made that have now made the agreement unjust. However, they will also consider the fact that the parties wished to achieve certainty as to the status, ownership, and division of property by entering into the agreement.

If any of these requirements were not satisfied, then you could apply to the Court to have the agreement declared void. The agreement would no longer apply, and your relationship property would be divided according to the 50/50 presumption under the PRA.

Conclusion

If your marriage has ended, you could apply to have the prenup set aside. The court could set it aside due to serious injustice, caused by unfairness or unreasonableness apparent at the time of signing, or that appeared later. Where a formal requirement was not satisfied when you signed it, you signed it under duress or, the Court is convinced that it would be unfair or unreasonable to enforce it in light of all the circumstances, the court has discretion to set the prenup aside.

However, as you willingly entered into the contract they will be cautious. Prenups would lose their primary purpose should the court exercise its discretion too widely. It would be best to seek advice from a family lawyer who can advise you based on your particular circumstances.

This article was first published by the NZ Herald.