Prenuptial Agreements in the Bahamas: An Overview
Justine A. Smith, a partner at McKinney, Bancroft & Hughes who specialises in family law and labour and employment matters, explores prenuptial agreements and their enforceability in the Bahamas.
Justine A. Smith
What is a prenuptial agreement?
A prenuptial agreement (“prenup” or “agreement”) is a written agreement made by persons who are engaged to be married in the near future. This type of agreement is used to document the intention of the parties as to the division of assets and finances in the event of divorce and is executed prior to the parties becoming married.
Who should enter into a prenuptial agreement?
Prenups have traditionally been used by high net worth individuals or those that have access to significant wealth to protect the same for future generations. It is a tool that may be used to seek to limit financial exposure upon divorce, and to reduce the chances of contentious and costly divorce litigation. The rationale is that both parties (prior to the marriage) have a clear picture, a road-map of sorts, that each have agreed to follow and be bound by in the unfortunate event of a divorce.
“It is critical that both parties obtain independent legal advice to ensure they understand their rights and understand how their agreement will be treated by a court.”
Prenups are not exclusively used by high-net-worth individuals. In fact, they are increasingly being used by young professionals, and small to medium size business owners who are engaged to be married for the first time, as well as those planning to remarry, either after a contentious divorce or following the death of a spouse.
What next?
Once a party decides that having a prenup in place is important to them, the next step is to consult an attorney to receive his/her preliminary advice. Shortly thereafter you should communicate your intention and discuss your proposal with your fiancé to avoid them being blindsided. This helps to manage everyone’s expectations and reduces the time spent negotiating the terms of the agreement. It is critical that both parties obtain independent legal advice to ensure they understand their rights and understand how their agreement will be treated by a court should they get divorced.
How are prenuptial agreements viewed by courts in the Bahamas?
Prenups are viewed as persuasive evidence of the intention of the parties. Prenuptial agreements are a factor to be considered when the court exercises its discretion under Section 29 of the Matrimonial Causes Act. It is important to understand that the court will decide the ultimate question of what provision is to be made, and the weight to be given to the agreement.
“It is the court, not the parties who will ultimately determine the fate of the agreement.”
Each marriage and thus each divorce is different and will be determined on its own peculiar set of facts. However, in conducting its analysis a court will be guided by the decision in Radmacher v Granatino [2010] UKSC 649where is was stated: “ the court should give effect to a nuptial agreement that is freely entered into by each party with a full appreciation of its implications unless in the circumstances prevailing it would not be fair to hold the parties to their agreement”.
Thus, a court in conducting its analysis must determine the following:
- Did both parties freely/voluntarily enter into the prenup?
- Did both parties understand the consequences of signing the prenup?
- Is the prenup fair?
Freely/voluntarily enter into the prenuptial agreement
The court will examine whether a party was under duress or undue pressure to execute the agreement. Should it be revealed that this type of conduct was present, the court would more than likely choose not to uphold the agreement. To reduce the risk of a court finding that there was duress or similar, experienced family law practitioners will advise their clients of the importance of signing the prenuptial agreement at least one month prior to the intended wedding day. Further, discussions and negotiations between the parties and counsel should commence a few months prior to the date the agreement is signed.
Did both parties understand the consequences of signing the prenup?
To satisfy the court that both sides understood the implications of signing the prenup it is crucial to prove that:
- Each party had the benefit of independent legal advice.
- Each party clearly understood the rights they were giving up.
- Each party received sufficient financial disclosure from the other.
- Each party clearly intended to be bound by the terms of the agreement, irrespective of whether the parties relocate to a different jurisdiction during the marriage.
Is the agreement fair?
In determining this question, the court will look to Section 29 of the Matrimonial Causes Act as explained in Miller v Miller; McFarlane v McFarlane 2006 2 WLR 1283(ie, needs, sharing and compensation).
InLuckwell v Limata [2014] EWHC 502 (Fam), Holman J gave helpful guidance on the question of fairness. In summary, whether or not an agreement will be held to be fair depends on the facts of each case. In addition, he noted that:
- a prenuptial agreement will not be allowed to prejudice the reasonable requirements of any children (welfare, maintenance, education, healthcare etc);
- in the case of a long marriage, what was “fair” at the time of signing the agreement is unlikely to be fair at the date of divorce, particularly if the position was not envisaged;
- a court is unlikely to see fairness in a scenario where one party is left in a situation of “real need” while the other has what is considered “sufficient” or “more than”;
- where each party is able to meet his or her real needs, fairness may not require a departure from the agreement; and
- there is nothing inherently unfair in an agreement making provision for existing non-matrimonial property including anticipated future income, and there may be good objective justification for it, such as obligations towards family members.
Conclusions
Prior to the execution of a prenuptial agreement both parties must be made aware of their respective rights and the scope of the court’s power under the Matrimonial Causes Act. It is the court, not the parties who will ultimately determine the fate of the agreement, hence why it is necessary to engage experienced family law practitioners to give sound advice and guidance from the outset, and during the negotiation of the agreement.
McKinney, Bancroft & Hughes
