Prenuptial agreements and capacity
1 August 2019
With the trend for prenuptial agreements growing, particularly amongst millennials, it is more important than ever to consider the benefits and drawbacks of entering into such an agreement and, in particular, for those clients who are vulnerable and may lack capacity in other aspects of their life, what they need to understand in order to have capacity to enter into these agreements and whether this is the best way to protect themselves. This was considered by the Court of Protection in the recent case of PBM v TGT & X Local Authority .
PBM acquired a brain injury at 12 months old. As a result, he received a significant compensation award. He was assessed as lacking capacity to manage his financial affairs and a deputy was appointed to manage them on his behalf. He was also described as having coexisting moderate learning difficulties, namely Asperger's, and epilepsy.
Since 2016, PBM had been in a relationship with his fiancée, MVA. There was some dispute about whether PBM had capacity to marry, but by the time the matter came to a final hearing the Official Solicitor (as PBM's litigation friend) agreed that PBM had capacity to marry and enter into a prenuptial agreement. However, he still lacked capacity to manage his property and financial affairs.
The question was whether it is possible to lack capacity to manage your property and financial affairs, but have capacity to enter into a prenuptial agreement? A secondary issue regarding the disclosure of financial information to a person lacking capacity about their own financial affairs was also considered.
Francis J confirmed that "there is nothing inconsistent in saying that PBM has capacity to make a decision about a prenuptial agreement but yet may lack capacity to manage his property and affairs generally on an ongoing basis."
As such, lacking capacity to manage your financial affairs does not automatically mean that you lack capacity to enter into a prenuptial agreement. Francis J even went as far as to say that whilst disclosure of a person's financial affairs is a "key building block of a successful prenuptial agreement" it would not be impossible to have an effective prenuptial agreement where the person entering into the agreement was not aware of the full extent of their assets. However, he was clear that "vulnerability is not enough to justify the withholding of information" and that PMB's deputy should disclose the information about PMB's financial affairs that he had requested.
The case provides some clarification on capacity to enter into prenuptial agreements. However, it failed to clarify what information a person must understand in order to have capacity to enter into a prenuptial agreement, which limits its usefulness to those acting as deputies and attorneys. This information was contained in the expert evidence of Dr Layton, which Francis J accepted, but did not set out in his judgement. This is frustrating and Francis J has certainly missed an opportunity to clarify the law on this point.