It
seemed like a mission impossible but Tom Cruise and Katie Holmes have reached a
financial settlement in their divorce case less than two weeks after Holmes
filed for divorce, in a New York Court.
Rumours have it that a prenuptial agreement had been entered in to by
the parties which resulted in the ‘quickie settlement’.
How
likely is it that this could happen in the UK?
Of
course, the extent of a couple’s matrimonial assets will differ from one
marriage to the next, and most of us do not have the luxury of Cruise’s $180
million in the bank to consider how best to protect its future. What is certain
however, regardless of the amount of wealth that you are holding, with the
right legal advice, and with the right strategies in place, you could protect
your wealth as much as possible. In this
article I will focus on protecting yourself financially before divorce: in
fact, before you even enter in to matrimony.
Prenuptial agreements are the only
real way in which to safeguard your interests but until very recently, they
were not given any weight in the English Courts. Last year, in a landmark case [Radmacher v Grantino], the Court
of Appeal reversed the earlier decision of the High Court to disregard the
parties’ prenup - instead holding them to it.
The parties were both foreign nationals, the wife German and the husband
French, who had signed a prenup valid under German law but then divorced in
England. At the first ruling the High
Court awarded the husband £5.6m even though the prenup had stated that neither
party would seek maintenance from the other in the event of divorce. The Court of Appeal allowed the wife’s
appeal.
On appeal the court stressed that
prenups are not automatically binding under English law and that the case
turned on its specific facts. Heavy
emphasis was placed on the fact that both parties were foreign nationals from
jurisdictions where such agreements are binding and the court ultimately upheld
the prenup.
This ruling has created a huge shift
in family proceedings. But, and I cannot
stress this enough, the ruling does not mean that the English Courts will
simply accept the terms of any pre-nup as a binding document. There are a whole array of factors and
hurdles that you have to comply with in order for your prenup to even get a
look in. Independent legal advice for
both parties, full disclosure of assets, consideration of any children (now and
in the future) are just some of the factors that need to be thought about and
complied with.
Sounds complicated – but it doesn’t
have to be. At Bains Cohen, we have all
the expertise in place to ensure your prenuptial agreement will be relied upon
at Court should the unfortunate situation of divorce arise. Sorting out your financial affairs before
marriage may sound clinical and rather loveless – but the prenup is no stranger
overseas and it will be seen more and more in our English Courts. Protecting your assets before your marriage
could save you thousands of pounds in litigation and more importantly your bank
account! If I tell you that the English Court’s starting point for
consideration of matrimonial assets on divorce is an equal division: 50- 50, I
am sure the idea of prenups is becoming ever more appealing.
Let me put it in to perspective: Where an
individual owns substantial assets, is likely to receive an inheritance, has significantly larger
amount of assets than the spouse-to-be and/or the spouse has substantial debt
or where you are not sure about your partner’s motives, pre-nuptial agreements
are the only way of protecting your future financial position in the event of a
breakdown in your marriage.
Look
at it another way: if you are an
entrepreneur, if you own a business or if you are a high flyer in your field of
expertise: likely to achieve great success
in your business or career, do you really want to risk half of everything being
given to your spouse on divorce?
We
understand that nothing kills a romantic candle lit dinner than saying “honey, I want a prenup” however protecting
yourself and your future is paramount even if that means having a discussion
with your partner on the benefits of a prenup for both parties. Of course no
one wants their marriage to end or goes into their marriage thinking it might
come to an end in the future, but with divorce rates back on the increase, a
little planning at the right time is never a bad thing.
As far as the Holmes and Cruise settlement agreement is concerned,
it is likely to include a bullet proof confidentiality clause which means
that we will never know any of the details of the settlement and by doing so,
both parties’ reputations remain intact and particularly, Cruises’ future
earning capacity in the film industry should remain unaffected.
So, if you are thinking about saying
‘I do’, as part of your wedding preparations, just step back and think about
the future as well. Are you the
“highflyer” in the marriage, are you coming into your marriage with a
significant amount of assets? Then you might want to think about how to have
“that” conversation with your partner. You would be well-advised to come and
speak to one of our experts as soon as possible about entering into a
prenuptial agreement or, if you have already entered in to a prenuptial
agreement and want to know whether it will be valid and binding on divorce, we
can help with that too.
Rupinder Bains
Partner
Bains Cohen LLP