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Prenuptial Agreement

10 February, 2015

So you’ve celebrated the engagement, planned the honeymoon and started writing the ‘grooms speech’. Should you now burst the romantic bubble and discuss the possibility of a pre nuptial agreement?!

Well if you’re the wealthy daughter of the very wealthy man responsible for the T.V character ‘Bob the Builder’, that is exactly what you should do. However, following a ruling in the High Court, this pre nup was disregarded on divorce and in fact the financial outcome was very different then that anticipated by the prenuptial agreement.

Mrs Luckwell a considerably wealthy woman, married Mr Limata with very few assets of his own. By the time they had divorced and their financial hearing was heard at court, Mr Limata had no assets and was in considerable debt. The Pre nuptial agreement had hoped to preserve Mrs Luckwell’s family money and made no provision at all for her husband. All property she owned and acquired later in the marriage was not to be shared with her husband. However having brought the matter to the High Court, this was considered unfair and substantial financial provision was ordered to be made for Mr Limata. In effect, the Pre nup was completely cast aside.

So are pre nups any use? Why shatter the romance by signing financial agreements that have no relevance on divorce?

Perhaps the prenup signed by Victoria Luckwell and Francesco Limata is an extreme version of a prenuptual agreement and indeed their situation involved a great deal more money than would be the case for most engaged couples. However, the case does highlight what can and can’t be  achieved by way of a pre nuptial agreement in the U.K.

Most pre nups come about due to ‘family money’/family  businesses. Perhaps the husband or wife has a stake in a successful family business or may own property passed to her through the family or may inherit great wealth in the future. It is usually these assets that the husband/ wife or maybe the family of the husband or wife would like to remain protected from potential ex’s. Generally speaking, this is a good idea. If a properly drafted agreement sets out clearly that certain money/ property brought to the marriage should remain out of any potential divorce settlement and both the husband and wife are in agreement, having been properly advised, then where is the problem?

Potential problems as highlighted in the case of Mrs Luckwell and Mr Limata include:

  • The agreement being all ‘one sided’ – in effect, Mr Limata agreed to financially support his wife and children if they separated but Mrs Luckwell was not to reciprocate, there was no provision at all for the husband.
  • There were two children, although when the prenup was signed, Mrs Luckwell was pregnant, there was no particular thought behind how Mr Limata would house himself and the children if they divorced. Presumably Mrs Luckwell intended to always have the child with her but what would happen when the child or children spent time with their father? Living in the lap of luxury whilst with their mother and in relative poverty with their father.

 

Fairness – The agreement was simply not fair. It relied on maintaining Mrs Luckwell in a position of great wealth and jettisoning Mr Limata into abject poverty if they divorced.

The High Court Judge concluded that provision had to be made for the husband in this case. Mrs Luckwell had to pay approximately £1.2m to her ex husband so that he could buy a property to live in until the youngest child was 22 years old. Thereafter the property was to be sold and Mr Limata was to receive 55% of the proceeds of sale so that he could secure a smaller property to use for himself.

Clearly, the above scenario is rare, and wealth far beyond the realms of ‘the normal’ married couple. However there are lessons to be learned.

Prenuptial agreements still have their place in the UK. Although not legally binding, prenups are a useful piece of evidence if divorce ensues. The pre nuptial agreement if properly drafted can clearly show what the parties intended to happen with the finances on separation. The courts will view this evidence carefully, however if the prenup is all one sided or overlooks the needs of any children, leaves one party homeless and without any financial support, the court will use it’s discretion as to how the prenuptial agreement should be implemented. Money invested in legal fees to draft the document may be wasted if there isn’t adequate provision for both parties to the marriage.

In conclusion, prenuptial agreements are a very important consideration if there is wealth to protect. However, be sensible and try and put yourself in a Judge’s position if the marriage turns sour. Would the agreement be considered fair? Has allowance been made for housing both parties to the marriage? What about children? Answer these questions carefully and money will be saved in court arguing the validity of the agreement.