FOOL SCHOOL
Pre-nuptial Agreements

November 3, 2003

Pre-nuptial agreements hit the headlines a few years ago with the wedding of Michael Douglas and Catherine Zeta Jones. In case you've forgotten the details, Catherine apparently managed to negotiate a rather jolly $3 million for every year that she stays married to her ageing Lothario. She'll obviously have to divorce him eventually to get it, but it must be some compensation to know, if things are going badly, that you've only got to hang in there for a mere decade or so in order to walk off with a cool $30 million! How long would you stick it out if you'd had a similar agreement in place 10 years ago.

The lovely Catherine has got a few million quid herself, of course, but it's peanuts in comparison to his supposed $200 million fortune. However, considering Mister Douglas is 25 years older than she is, he's had a bit of a head start. To be honest, why should she be entitled to dip into the money he was earning on the Streets of San Francisco when she was still at primary school? She'd only known him for a couple of years when they married, after all.

This news from Hollywood did pose an important question. Is a pre-nuptial agreement a good thing for us 'commoners' before we take the plunge?

It's probably only worth it when there are substantial assets involved at the start - but it also depends on whether you're the one with the money! To an extent, the question is academic anyway, because the pre-marital agreement isn't officially recognised by our UK courts. That's not to say that a judge will automatically throw it out though. And there have been hints from the Government in the last couple of years that it should be given more credence - not least because of the potential cut in the Legal Aid bill, as well as the number of messy divorce cases that are currently clogging up the system.

At the moment, in this country, a 'pre-nup' will sometimes prove persuasive to a court when divorcing couples are arguing about who promised what to whom - but it's usually only when the marriage has been comparatively short and there are no children involved. And it would certainly be struck out if it were considered in any way unfair to either of the parties, or if it appeared to have been signed under duress.

There are already divorce laws in place governing the division of property, maintenance and the residence of any offspring, which would override much of what might be set out in a pre-nuptial agreement. Currently, the court's first priority is to look at each partner's income and assets at the time of the divorce, the length of the marriage, their ages, standard of living and the reasonable requirements of the 'poorer' party. The terms of a pre-marital agreement come way down the list of considerations, particularly if it was drawn up a long time before the divorce and circumstances have changed. And, if there are children involved, it may well be ignored altogether.

However, in view of the recent legal landmark case of White v White, it still might be worth thinking about for the wealthier among you before you take that walk down the aisle. Particularly if you're about to enter a second marriage and want to safeguard inherited family money, your business, or your children from a previous relationship. After all, if your partner agrees to abandon future claims to a moderate amount of the incoming assets, he or she can hardly demand the agreement be set aside at a later date without good reason. (It goes without saying that, if you're the poorer partner and you're not being offered much - don't sign!)

Cohabitation Agreements

The rules for unmarried couples are quite different. Cohabitation agreements are wholly enforceable by the courts if they choose, because they're seen as binding contracts between unrelated parties. Couples who aren't married have no legal right to each other's money regardless of how long they've lived together so, if they're committed but simply don't believe in marriage, a cohabitation agreement might be a good solution. In cases where one partner has substantial wealth and the other does not, they can prove rather useful in setting out who owns what and where it should go in the event of a breakdown in the relationship. It would certainly provide a measure of security for the less wealthy partner if she can negotiate a decent deal. (In this instance, if you're the wealthier partner - don't sign!)

At any rate, there's no doubt that Catherine Zeta Jones has been given a huge incentive to make her marriage work for as long as possible.