English family law has all but thrown off its reticence around the use of pre and postnuptial agreements.
In the UHNW sector, where financial arguments on divorce can transition quickly into hugely expensive High Court legal battles, the use of such agreements has become standard, as a means of protecting dynastic wealth and/or avoiding arguments as to how corporate equity in the form of carry or co-investments should be divided, or where there are cross-border considerations and a possible choice of jurisdiction.
While still not strictly binding on the Family Courts, the landmark Supreme Court ruling in Radmacher v Granatino [2010] UKSC 42 shifted the emphasis over to upholding a prenuptial agreement if –
- it is entered into by the parties of their own free will, without undue influence, or duress or pressure;
- each party provides full financial disclosure, giving a complete and honest account of their assets, liabilities and income; financial and corporate advisers are often involved in the preparation of such financial disclosure;
- each has full and independent legal advice from separate advisers respectively so as to ensure that they understand the implications of the agreement fully;
- the agreement should be signed and witnessed at least 28 days before the wedding; some advisers are now suggesting that the signing and possible notarisation of the Agreement are recorded;
- the agreement should meet the financial needs of both parties and any children, as if it leaves one party in a predicament of real financial need, it is likely to be varied/set aside.
Along with the rise in the number of couples opting for prenuptial agreements, comes the rise in their sophistication and circumstances covered. Take for example, how carry and co-investments are divided on divorce. Some may not unreasonably see such assets as income providers and therefore outside the scope of a capital division. Not necessarily so as it is easier to value and divide older schemes especially if matrimonial funds have been used to finance them in the first place. However, reference in a prenuptial agreement to the parties agreeing to exclude such assets will be determinative provided the above criteria are still met.
Another good example relates to the existence of trust assets. Arguing over whether or not they are a resource and what payments/receipts a spouse has received will often involve the trustees at the very least, seeking advice if not being fully represented, thereby increasing the scope for more expensive arguments/hearings. The careful drafting of a prenuptial agreement excluding any reference to Family Trusts which are pre-existing assets, in any event, will close down such arguments, again provided always that reasonable needs are met for both parties and their children.
Long term wealth preservation and protection can be achieved through the use of a carefully drafted prenuptial agreement. Talk to our Family Law Team for further information and details as to our first-class reputation and experience in this field.
