Shutting the stable door with three little words
Prevention is always better than cure. How many times have we all said ‘how I wish I’d done this before it was too late!’. For some of life’s ups and downs, there are simply no preventative measures. For others, help is at hand, but sometimes it’s a nettle which may seem embarrassing to address, let alone grasp. As a professional, running a profitable business, can you afford to be squeamish?
I am a divorce lawyer. My specialism is handling cases involving clients who have high net worth assets, and who are, sadly, bringing their marriages to an end for one reason or another. In many cases, one spouse has brought more into the marriage at the outset than the other spouse – a pre-owned and well-established business, a farm passed down through the generations, a long-established NHS pension; just to mention a few common examples. When the marriage comes to an end, I am often asked ‘how come my spouse gets half of all I own, when I had most of it my wealth for many years before I ever thought about getting married?’.
The answer is simple; the Matrimonial Causes Act 1973 makes it possible. Judges take each side’s assets into account, when deciding how the family pot gets split up after a divorce. It may seem unfair, but life isn’t always fair, and the law is the law.
Well, there is a way of evening up the odds significantly. Three little words which can work wonders, and save a lot of money, worry and recriminations. Pre-marital agreements.
Don’t they seem to sit a little uncomfortably with the idealistic hopes and aspirations associated with true love and marriage? Maybe 20 years ago the answer would have been ‘yes’. Today we are more upfront as a society. Pre-marital agreements have been the territory of the super rich for many years (though not for Sir Paul McCartney surprisingly enough). Now, there’s a boom in pre-marital agreements for the professional classes, and especially those who are about to enter a second marriage.
What is a pre-marital agreement then? A contract which both husband and wife enter into freely, before the marriage, setting out how each party wishes their affairs to be dealt with, in the event that the marriage does not last. If it is left till the eleventh hour, just weeks before the marriage, it’s too late to do any good. The presumption that one party was making the agreement without full and free consent will be difficult to overcome.
PMAs have to be looked at in the cold light of day, and planned for, in the same way as any other wealth management planning, or tax avoidance procedures. It is after all designed to do the same task – preserving wealth for one (or both parties) to the marriage. We are open with our spouses about our hopes for the marriage, and our futures together. We can be equally open with our spouses about how our assets are to be un-entangled, should the marriage not stand the test of time.
So, how do you draw up a PMA? To make a PMA as watertight as it can be, certain criteria need to be fulfilled, just as with any wealth-management planning. Most importantly, both parties need separate legal advice. Don’t follow this step, and the PMA is doomed to sink like a stone.
Secondly, both parties have to be frank with each other about the extent of their assets. If only part of the jigsaw has been disclosed by one side or the other, you can anticipate the arguments which will follow later. ‘If I’d known the business was worth that much I would never have agreed to this!’, for example.
Third, the agreement has to be fair, and to make reasonable provision for the financially weaker of the two parties. A PMA which says ‘you get nothing from me if we divorce!’ is not going to be worth the paper it’s written on. It is better to be fair in a way that you can live with, than run the risk of an anonymous Judge imposing his/her idea of fairness upon you, later on, at considerable cost.
It is good practice to provide that the PMA will be reviewed in 2 – 3 years, providing the marriage lasts. That way, the concept of fairness and reasonableness can more easily be satisfied, if the PMA ever has to be tested out in Court in subsequent divorce proceedings. Time changes things. What might be fair if a marriage lasts only 2 years, is most definitely not going to be viewed as fair, if it lasts 10 years, for example.
Elizabeth A Hodder
Solicitor and Collaborative Lawyer
Partner Gross & Co Solicitors (Approved Dental Legal Representatives for CODE)
Please visit www.gross.co.uk to see what Gross & Co. can do for you.
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