City men should think of pre-nups
PARTNER, MISHCON DE REYA
A DECADE ago this October, English divorce law was revolutionised by the case of White v White. Firstly, it recognised the non-financial contributions of the wife, and secondly it said that the default position when dividing assets at the end of a marriage should be to share them equally.
Given this significant shift in approach, family lawyers expected a rise in pre-nuptial agreements, particularly from wealthy men wishing to protect their assets from a court-imposed 50/50 split. But that hasn’t happened, perhaps because there is no law upholding pre-nups in this country. However, this summer we could be about to see a profound change in the way that the English court approaches pre-nups when we learn the outcome of another case.
German heiress Katrin Radmacher, who is worth £100m, is currently fighting to enforce a pre-nup that her husband signed, which would protect her personal wealth. If the court finds in her favour, then while pre-nups will still not binding, the decision could signify a more robust approach being adopted by the court in dealing with such marital agreements.
Added together, this all means that high-earning men should be thinking much harder about pre-nups than they are at the moment. Research that we have carried out shows that although 40 per cent of high net worth men – those who earn £100,000 a year or more – say that they considered one, only 8 per cent actually signed one. Sixty-three per cent say that they believe that their assets should be split equally should they ever divorce. A nice sentiment, perhaps, but they may not be feeling so generous if they ever do end up in court.
Even though pre-nups are not binding in England, they are often taken into account by a judge during divorce proceedings. In some cases it has been the main factor which the court has relied on. A pre-nup allows you to take some control of your finances, and if you are of full age, education and understanding, why should it not be assumed that you know what you are doing rather than the court?
One of the reasons that men are reluctant to enter into pre-nups is perhaps a romantic one, but they are just not facing up to the reality that a half of all marriages fail. Pre-nups may be seen to undermine commitment, but really they should be seen as a kind of insurance against expensive and lengthy litigation. Taking out insurance on your partner’s life would not imply that you anticipated their early demise. Likewise, wanting a pre-nup does not mean that you want to or expect to divorce. By not recognising the reality of divorce statistics, men are avoiding a responsibility to look after the family finances.
There is an upside to pre-nups. Acrimonious divorces are generally caused by disputes about money. This can damage relations between parents and children. Rather than a pragmatic romance-killer, pre-nups should be seen as an opportunity for both parties to seek predictability and certainty of outcome. It might be embarrassing to talk about money, but they have overcome this in Europe and in the US, so why not here?
There is also a misunderstanding about what pre-nups are. Rather than being one-size-fits-all, global agreements about all of a couple’s assets, they can be tailored to suit individual circumstances and may only need to deal with certain assets. People are getting married later these days, and have often built up some assets before they marry. It might well be reasonable to protect those – this is especially true in the case of second marriages, and even more so if there are children from previous relationships. Or there may be a property that has been inherited and which has emotional importance that a party would want to keep.
The men we spoke to felt that the court tends to be more favourable towards women in a divorce settlement. Yet they still took no steps to protect themselves. It is time for them to ensure that all the appropriate safeguards are in place to ensure they do not leave themselves unprotected from potentially costly legal battles.