Prenup case study

We represented a soon-to-be Wife in reviewing the terms of a Pre-Nuptial Agreement (the “Pre-Nup”) drafted by her soon-to-be Husband’s solicitors. The parties had been in a relationship for nearly 10 years and had cohabited for 7 of those years. The parties did not have any children, but they had discussed the possibility of having children in the future.

There was a significant disparity in assets between the parties, with the Husband owning assets valued in excess of £15 million compared to £260,000 owned by the Wife, which comprised of a 20% share of the Family Home where they lived together. The Pre-Nup, as originally drafted, sought to ring-fence the Husband’s significant pre-martial assets and sought to ringfence assets acquired by him post marriage as separate property (any bank accounts, savings, investment funds, investment properties etc not shared jointly with the Wife). The net effect of this was that upon the permanent breakdown of the marriage, the Wife would be left with her 20% share of the family home, an insufficient sum to appropriately re-house herself.

Our approach and advice

We sought a number of revisions to the draft prenuptial agreement. . Issues we raised included :-

• the proposed terms were unlikely to reflect what a court would consider fair, , particularly given the length of the relationship and the financial disparity. This would likely result in the Court being unwilling to uphold the terms of the Agreement.

• the agreement attempted to exclude the Wife from any interest in property acquired during the marriage unless held in joint names. This would create a risk of Husband continuing to purchase assets in his sole name, the likely effect being that his own financial position would be bettered, rather than the matrimonial pot being bolstered.

• we advised that the Pre-Nup should make considerations for compensation, if one party suffers an economic disadvantage as a result of joint decisions, for example giving up work to care for children.

• we advised that spousal maintenance should be a consideration. The only maintenance consideration in the draft was to maintain future children and did not account for the Wife’s income needs following the breakdown of the marriage.

• we advised that the Family Home should form part of the matrimonial pot. As a starting point this should be held in equal shares. There were arguments back and forth as to whether the Wife’s interest in the Family Home should be increased alongside length of marriage (i.e. 35% after 3 years of marriage, 50% after 5 years of marriage).

• we argued that the Pre-Nup should include a requirement for it to be reviewed on a significant change of circumstance and every 5 years, whichever the sooner. Relevant changes in circumstance can be the birth of a child, severe ill-health of one party, loss of employment, redundancy.

Outcome

The final agreement retained the Husband’s core proposals but incorporated key protections for the Wife as the economically weaker party.

We negotiated an agreement that :-

• on the fifth anniversary of the marriage, the Family Home would be held in joint names in equal shares

• provided that any future property purchased would be viewed as a matrimonial asset which would then be divided equally as a starting point in the event of a divorce.

• included provisions for maintenance and compensation, ensuring the Wife would have access to sufficient income and capital to meet her needs in the event of divorce. Separate property remained protected for both parties.