With a fortune of $137 billion at stake, the divorce of Amazon founder Jeff Bezos and his wife MacKenzie is set to be one of the most expensive in history.
And it is reported that there is no pre-nuptial agreement in place.
Mr Bezos will join the likes of Kenny Rogers, Mel Gibson, and Russell Brand. All three had to part with millions because there was no prenup in existence.
As people are marrying later or tying the knot more than once in a lifetime, the importance of prenuptial agreements is growing. And since the Supreme Court decision in Radmacher v Granatino, the legal weight given to a pre or postnuptial agreement has increased considerably:
“The Court should give effect to a nuptial agreement that is freely entered into by each party with a full appreciation of its implications unless in the circumstances prevailing it would not be fair to hold the parties to their agreement”.
Although such a statement does not go as far as to say a nuptial agreement is legally binding, if certain conditions are met (which will be discussed below), it is likely to be upheld.
What is a pre or postnuptial agreement?
A prenuptial agreement is an agreement entered into by a couple prior to getting married or entering into a civil partnership. It sets out how property and assets will be divided in the event of divorce or dissolution. A prenuptial agreement can also state how much spousal maintenance will be provided and for how long.
A postnuptial agreement is essentially the same as a prenup, the difference being that the former is entered into during marriage. They are sometimes used in the event of a trial separation, or where the couple is thinking about divorce but wants to give things “one last try”. By deciding on how property and assets will be divided should they part ways permanently, parties can ease the pressure caused by the anticipation of a dispute around finances and concentrate on making their marriage work.
Prenuptial agreements are particularly important whereby:
- One party has significantly more wealth than the other
- One or both parties are bringing in to the marriage substantial independent wealth gained from inheritances or property/business sales
- There are assets held in another country
- One or both parties have children from a previous relationship and wants to protect certain assets to pass on to them through their Will
What are the advantages of a pre or postnuptial agreement?
A pre or postnuptial agreement provides the following advantages:
- Clarity – both parties in the relationship can clearly define how their finances will be treated throughout the marriage or civil partnership. And importantly, the financially weaker party can take comfort in the fact that complete transparency regarding all property and assets has been made.
- Certainty – the couple know how their finances will be managed if they separate and do not need to fear the possibility of expensive and stressful court proceedings.
- Protection –property and assets listed in the pre or postnuptial agreement will be protected from a later claim.
What is required to make a pre or postnuptial agreement fair?
The Supreme Court set out a test for fairness in Radmacher v Granatino. To be considered fair the agreement must be:
- Freely entered into – the agreement is unlikely to be upheld if there is any evidence of duress, fraud, misrepresentation, or unconscionable conduct, such as the exploitation of a dominant position to secure an unfair advantage. The Court will also consider factors such as the parties ages, relationship experience, and emotional state at the time of signing.
- Fully understood by both parties – both parties should take independent legal advice and the Solicitor should ensure their client understands what the agreement means for them in the long-term
- Such that it is fair to hold the parties to the agreement in the current circumstances – for example, if the agreement leaves one party or any children in a state of real need then it may not be upheld.
The Court made clear that the autonomy of adults should be respected. It is “paternalistic and patronising” to override the terms of an agreement simply on the basis that “the court knows best”.
Although having a pre or postnuptial agreement may seem unromantic, they can provide certainty and confidence. Bitter disputes over finances will drain you of money and peace of mind. By investing in protecting yourself and your assets in the event of a divorce, you can relax into married life.