Prenuptial agreements: an investment for the future

Updated September 2011

Sir Paul McCartney's love life has hit the headlines again over recent weeks.

Not because of whom he is marrying, but rather because he is embarking upon his third marriage without demanding a bullet-proof prenuptial agreement to protect his hard-earned wealth.

Heather Mills received capitalised maintenance and assets totalling £24 million, plus child maintenance totalling some £35,000, per year. Luckily for Sir Paul, this fell significantly short of the £125 million financial relief she was seeking.

This time round, the bride-to-be is Nancy Shevell, a successful fifty-something divorced businesswoman. She is the vice president of her family-owned business and a board member of the New York transportation authority. With her own wealth and a solid career behind her, it is apparent she is not out to make money from the marriage. Perhaps then, one can see the sense in Sir Paul dismissing the need for a marriage contract.

The most important thing to Sir Paul is that the trust funds for his children are protected and it is thought that Ms Shevell will sign a simple page-long document, agreeing that she will not make a claim on the children's trust funds in the event that the marriage fails. It is thought that nothing else will be set in writing.

Following the recent Supreme Court ruling in Radmacher v Granantino [2010] UKSC 42, confirming that "appropriate weight" should be given to prenuptial agreements on divorce, the legal world has predicted a growth in the demand for such contracts.

Asking your spouse-to-be to sign up to prenuptial agreement is hardly the most romantic gesture with a wedding on the horizon. However, when you haven't got the multi-million pound asset reserve that Sir Paul boasts, but still want to protect pre-marital wealth, a "marriage contract" can save the heartache, financial strain and large legal fees that can be incurred upon separation.

I do… Do I?

Historically, most fully accept the need and benefit of insuring every other aspect of their lives, from the Big Day itself, to the house, pets and holiday– planning for the worst case scenario in the hope it won't ever happen. So why should separation be any different? Over the past year, here at TLT we have seen an increasing number of people accepting that a prenuptial agreement is not something that contradicts the notion of true love and the romanticism of a fairytale wedding, but simply another form of trying to protect oneself against the unknowns of the future.

Both in the United States and the UK people have started to investigate the merits of divorce insurance. However, whilst this may protect against escalated solicitors' costs relating to the divorce itself, a prenuptial agreement can avoid incurring hefty solicitors' fees altogether on marriage breakdown. It will not only factor in everything that a solicitor would usually advise upon during a divorce, even down to determining which country should take priority in a divorce involving people of different nationalities, but can also ring fence assets brought to the marriage which could become vulnerable in financial proceedings upon divorce.

Where there is wealth passing through generations, whether in the form of a contribution towards a property purchase, or even as a means of efficient inheritance tax planning, it is important that there is every opportunity to try to protect those assets. A prenuptial agreement can act as a ring fence, meaning that on separation such assets can remain intact, be returned to their original owner, or divided in accordance with a prior agreement.

No matter the size of the assets involved, the aim of all prenuptial agreements is to clearly establish in both parties' minds what happens in the unfortunate event that the relationship breaks down, and therefore potentially avoid significant legal costs at that stage.

With the average divorce costing some £13,000 many couples will realise that a prenuptial agreement at the outset of a marriage is a small price to pay in order to prudently protect against the unknowns of the future.

Natalie Drew is an associate in TLT's Family team who acts for a wide range of clients in areas including premarital agreements, divorce, separation, cohabitee disputes, harassment issues and domestic violence. She has particular expertise in cases involving children.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at September 2011. Specific advice should be sought for specific cases; we cannot be held responsible for any action (or decision not to take action) made in reliance upon the content of this publication.

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