[ad_1]
Prenuptial agreements — once used mainly by Hollywood stars — are no longer the preserve of the rich and famous. A rising number of wealthy entrepreneurs and those with substantial family legacies are also seeking to protect their financial concerns before they get married, with growing interest in parts of Asia where such arrangements were once viewed as an infringement upon the sanctity of marriage.
“Working out who gets what in the unfortunate event that a marriage breaks down — even before vows are exchanged — is fast becoming a focus for Asia’s wealthy families, particularly those wanting to ensure their wealth is protected for generations to come,” says Jocelyn Tsao, who leads the Hong Kong divorce and family team at Withers worldwide law firm.
She says one of the driving forces for change across places such as Singapore and Hong Kong is from the patriarch and matriarch — keenly aware of the impact that a divorce can have on a family’s wealth.
Protecting family wealth
“I have clients come to me and say, ‘My son or daughter is getting married, I would like them to sign a pre-nup’ before they enter into marriage,” Tsao says. “Or a daughter telling me she’s being forced to sign a pre-nup by her parents before they give their blessing, or as a condition to inheritance. A lot of parents just want to preserve wealth and keep it in the family.”
A trend lawyers are seeing is that families are stipulating the need for a prenuptial agreement for next-generation marriages and writing it into their ‘family charter’, which all members of the family are asked to sign.
Patricia Astley, managing director at Julius Baer International, says these guidelines can potentially help those contemplating marriage to show their partners that the use of a prenuptial agreement is the family’s wish and relevant to all those members marrying rather than something that they are specifically driving.
Astley adds that sometimes the contracts are driven by the children themselves. “There is an increasing acceptance and understanding by the next generation that they are the custodians of family wealth that has been accumulated and, as such, there is a willingness to enter into these conversations with prospective spouses in the absence of other planning options,” she says.
A change in attitude
A prenuptial agreement is a contract between a couple before they marry, agreeing on the distribution of their assets in the event of a divorce and lays out who owns what assets and how they will be divided.
They have increased in popularity in the UK after the landmark case in the Supreme Court of the German heiress Katrin Radmacher, in October 2010, which resulted in prenuptials being given increasing weight by the English courts. The pre-nup was upheld, which meant Radmacher was allowed to protect her fortune and restrict what her former husband was entitled to following the divorce.
However, it is only in the past five years that these agreements have become acceptable in society across parts of Asia. “Go back 10 years and pre-nups were very much unwelcome in Chinese society because we Chinese are quite superstitious and we feel that it’s bad luck to discuss the terms of separation when you’re getting married,” says Tsao. “But we’ve seen a big shift in attitude so more and more people — not just the younger generation but the older generation are being receptive to the idea of pre-nups.”
Others cite the increased financial uncertainty for the recent surge in pre-nups. With jobs and financial stability hit, lawyers say many couples now want control over their finances and are opting to protect their assets and secure their financial future.
Then there is the fact that people are becoming more financially independent before marriage and marrying much later in life — often more than once. “As blended families become more prevalent,” Hannah Mugleston, a lawyer at Stowe Family Law in London, says, “prenuptial agreements are being used by people entering into second or third marriages to protect inheritance assets for children from previous marriages or relationships.”
There is a common misconception that pre-nups favour the financially stronger party to the disadvantage of the financially weaker spouse, but Tsao says that as long as a pre-nup is fair to both parties, it’s likely to be upheld by the courts. She advises many women in Hong Kong with higher-paying jobs than their partners to sign a pre-nup.
The legal systems in Hong Kong and England have historically benefited the financially weaker spouse in a divorce where there is no pre-nup. “In Hong Kong, even if a woman divorces her husband because he cheats, she would still need to part with her wealth and maybe even pay spousal maintenance to him if she is the financially stronger party,” explains Tsao.
This is because the starting point for the division of assets in a divorce is 50:50, because the law is based on the assumption that both parties would contribute equally to the marriage. “Traditionally, this might have been fair, because the female would have stayed at home to look after the house and the children and the male would have been the breadwinner,” Tsao says. “But because of the changing dynamics in society, there might not be such a differentiation between roles. I see many women who have the responsibility of being both the breadwinner and the homemaker — and in those situations, the starting point of 50:50 does not look so fair.”
This is where pre-nups come in, as they can set out the division of assets to guide the courts.
A sign of mistrust
One of the biggest sticking points for some couples, say lawyers, is that prenuptial agreements are seen as unromantic and a sign of mistrust, but this perception is rapidly changing. It’s also the case that in some instances they are not legally enforceable.
Ivan Cheong is a partner in the Singapore law firm Withers KhattarWong, whose clients include a number of successful individuals and family members in the Forbes Asia’s Richest Families list. He says prenuptial agreements “are not automatically enforceable, but they are still valid and can be given significant weight by the court if certain requirements are met”.
Over the past few years, he says his clients in Singapore have started to view pre-nups less of a taboo topic and more of a form of insurance. “Couples might be inclined to take a risk and do without one, but they will be glad to have it in place — and have the coverage and financial protection — should things break down in their marriage,” he says.
A pre-nup will only be upheld for the court if it is deemed to have been entered into “fairly”. Chris Longbottom, expert divorce lawyer and partner at the UK law firm Clarke Willmott, says pre-nups should be drawn up as near to the wedding as possible. “The couple must also have both taken independent advice and understand the nature and effect of the agreement, without there having been any duress to enter into its terms,” he says.
The recent case involving the singer Ariana Grande and her divorce from real estate agent Dalton Gomez is an example of how pre-nups can work. Because the couple had one drawn up, Grande’s estimated $240mn net worth has remained largely intact, with a single lump-sum payout of $1.25mn to her ex, in lieu of any spousal support payments, and half of the value of their house.
Different jurisdictions have different rules
There are risks with these agreements, however, such as when a couple move to another country during their marriage and do not enter into a mirror postnuptial agreement in their new country of residence, where the local courts may not uphold the original prenuptial agreement. As Vanessa Duff, a partner in the Hong Kong office of the international law firm Charles Russell Speechlys, explains: “Drafting something that works in Hong Kong, but then the happy couple move to the United States, may mean that the agreement doesn’t protect against financial outcomes where the divorce takes place.”
Eliana Sydes, head of financial life strategy at Y Tree, a wealth tech platform based in the UK, agrees. She adds that a good pre-nup should map out the course of a couple’s life by including “phases” such as pre- and post-children.
Lawyers dealing with globetrotting couples tend to have a list of family lawyers around the world who can be called upon to advise on any essential terms that should be included in the agreement.
What the pre-nup covers
Pre-nups are not always limited to assets. Some might include a family pet and can stipulate “visitation” rights. Agreements can also set out that both parties bear expenses equally, and any dispute over expenses and time with pets should be resolved in mediation. Other non-standard pre-nups include one handled by Withers that involved an infidelity clause, by which, if the basis for divorce was on grounds of the husband’s infidelity, the wife would receive an additional lump-sum payment over and above the agreed financial settlement.
Postnuptial agreements
Another area of marital contracts experiencing a surge is postnuptial agreements. Edward Floyd, partner in the family team at Farrer & Co in London, says: “Couples are entering into postnuptial agreements as a ‘belt-and-braces’ additional layer of protection” on top of a pre-nup.
Floyd says postnuptial agreements are a good option for families that may live in a country such as France or Switzerland, which have summary civil law marriage contracts. These are generally one- or two-page documents in a standard format. In comparison, a postnup is a bespoke document prepared to deal with each family’s specific circumstances.
“England has a reputation for being a magnet for those seeking the highest divorce awards internationally, and it is advisable to consider whether a postnuptial agreement would offer greater certainty or protection,” says Floyd.
However, Sarah Anticoni, a partner at Charles Russell Speechlys, warns that, while a postnup can provide reassurance regarding what the financial outcomes might be if the marriage was to flounder, the downside is, if a postnup cannot be agreed by negotiation, it might then lead to divorce.
This article is part of FT Wealth, a section providing in-depth coverage of philanthropy, entrepreneurs, family offices, as well as alternative and impact investment
[ad_2]
Source link
