Prenuptial agreements, often shortened to prenups, are private contracts between individuals who are about to marry, setting out what should occur in the event of a divorce, but they are not free of state regulation, writes David Hodgson, a Partner in solicitors Bishop & Sewell’s Family & Divorce team.
In situations where one party comes from a wealthy family and has received or is likely to acquire significant family wealth during the marriage, a prenup may provide protection in relation to such dynastic wealth.
Equally, prenups are an attractive option for those who have acquired wealth, which they want to protect for their children or others in the event of a divorce. In case you’ve ever wondered what the rich and famous do to protect their wealth, many of them sign prenuptial agreements so that they have more clarity and certainty on what may happen if they decide to separate or divorce in the future,
However that doesn’t always happen.
Now these are some extreme cases where couples parted without a prenup, but take a look at the consequences, if some prudent forward planning isn’t included in your wedding plans:
- Donald and Ivana Trump, married for 15 years. Settlement £19,000,000.
- Paul McCartney and Heather Mills, married for 4 years. Settlement £24,000,000 + £35,000 per annum.
- Madonna and Guy Ritchie, married for 7 years. Settlement £50,000,000+.
- Michael Jordan and Juanita Vanoy, married for 17 years. Settlement £128,000,000.
- Mel Gibson and Robyn Moore, married for 31 years. Settlement £325,000,000.
- Bernie Ecclestone and Slavica Radic, married for 23 years. Settlement £740,000,000.
- Rupert Murdoch and Anna Torv, married for 31 years. Settlement £1.3 billion.
- Alex and Jocelyn Wildstein, married for 21 years. Settlement £2.9 billion.
- Jeff and MacKenzie Bezos, married 25 years. Settlement £27 billion.
Even if you are married it is not too late. You can enter into a post nuptial agreement or postnup which has the same effect. My colleague Louise Barretto has also written about pre and postnups with some great insights on her blog, here.
Divorces can be acrimonious and having certainty as to what is to occur in the event of a divorce or a permanent separation may reduce the time of agreeing a settlement – and therefore the costs. Litigating in courts is a costly and stressful business.
No one enters into such an agreement expecting their marriage to fail but it is akin to an insurance policy and should the unthinkable happen, everyone knows where they stand. Therefore, if the marriage does end, any divorce and financial sort out will be a much more straightforward and a lot less stressful.
Are nuptial agreements legally binding?
No. The parties to a prenup cannot override the Court’s broad discretion to decide how to redistribute their assets and income on an application for financial remedy on divorce. However, since the case of Radmacher v Granatino back in 2010, the Court has decided that they will uphold such agreements as long as they are fair. It may be that a nuptial agreement is given decisive weight but his will depend on the circumstances of the case, the way it has been drafted and prepared as well as what it provides.
Therefore specialist legal advice is essential for anyone considering entering into such an agreement.
Often prenups outline that couples will essentially leave the marriage with what they entered with, with ‘marital assets’ split evenly. However, if premarital assets are so disparate that they would make such an agreement unfair, couples can choose to set other terms.
It might seem obvious that children would play an important role in constructing any premarital agreement, with terms differing depending on if there are children involved. In reality though, issues concerning children are generally off-limits in both prenuptial and postnuptial agreements. The focus is placed on ensuring both parties’ financial needs are met albeit the advent of children could influence the quantification of these needs.
As society changes other items are regularly being considered in such arrangements. For example, eggs, sperm or embryos banked for reproductive purposes. While couples may not be able to predict whether they’ll go on to use assisted reproductive technologies later in their relationship, those that do, may wish to specify the fate of these materials in the event of a divorce. There have been several custody-style cases, when couples separate, regarding use of jointly created embryos. My colleagues in the Forming Families team are experts in this field.
Although each party to any prenup or postnup will require separate legal representation, we also recommend that one party should at least arrange to have a brief conversation with a specialist family solicitor at least two months before their planned marriage date. This should allow sufficient time to prepare and finalise an appropriate agreement, if appropriate.
It is recommended that the agreement should be signed no less than 28 days before the marriage. The couple will also need to provide disclosure of their financial circumstances to each other. The costs will depend on the complexity of the couple’s financial situation and the agreement, but each party’s solicitor should be able to provide an estimate of the likely costs at the end of their initial discussion.
If you are affected by similar issues or would like to have a related discussion in confidence, please call me on 020 7091 2869 or email firstname.lastname@example.org
The above is accurate as at 29 October 2021. The information above may be subject to change during these ever-changing times.