Prenup Loyalty Clauses Triggering ‘Diarised’ Divorces
Published on 11 December, 2017 | Back to News/Press
Almost 10 per cent of couples who marry after signing prenuptial agreements are divorcing because of ‘loyalty payments’ contained in the documents.
One of the country’s leading family law firms has reported a recent surge in wives deciding to end their marriages after reaching wedding anniversaries entitling them to greater incremental proportions of their husbands’ wealth in the event of a break-up.
Sam Hall, the Senior Partner with Hall Brown Family Law, described how there had also been a spate of husbands filing for divorce in order to avoid the so-called ‘lockstep’ payments contained in their prenups.
Mr Hall said he believed the increase in such cases was at least partially due to a 2010 Supreme Court ruling which gave the documents added legal weight.
“Ever since the current law governing divorce in England and Wales was introduced more than four decades ago, courts have been required to consider the length of marriages when weighing up possible financial settlements for those which collapse.
“In general, financially-weaker spouses are likely to receive a greater proportion of joint marital assets the longer that they are married.
“The Supreme Court ruling in favour of Katrin Radmacher made prenups much more popular than they had previously been and has spurred a significant increase in the number of couples adopting them in the seven years which have followed.
“However, the judgement also underlined how prenups needed to be fair and in line with the principles of divorce law when it came to things such as how long spouses were married.
“That was taken to mean that there shouldn’t be simple, fixed sums but stepped payments – which have been likened by some commentators to loyalty bonuses – instead, which increase in size the longer that a married couple stays together. They most commonly involve amounts corresponding to wedding anniversaries every five years.
“Whilst the idea behind them was fairness, we are seeing an unanticipated consequence of that system in which couples are bearing those payments in mind when it comes to deciding when to leave what they regard as a failing marriage.
“We have had cases in which wives file for divorce almost as soon as they reach milestones at which they would be entitled to greater sums on divorce under the terms of their prenup and husbands who initiate proceedings once they realise that they will have to hand over what can be fairly considerable amounts should their marriages collapse.”
Mr Hall’s comments follow the publication of figures by the Office of National Statistics (ONS) showing that there were 106,959 divorces in 2016 – 5.8 per cent more than the year before. It was the first recorded rise in divorces since 2010.
The same data revealed that 10 per cent of couples had divorced after five years of marriage, with twice as many spouses breaking up after a decade together.
Mr Hall said that Hall Brown handled almost 400 divorces over the last year and completed just over 30 prenuptial agreements on behalf of clients.
He added that the documents had been fuelled by the October 2010 Supreme Court ruling which limited the financier Nicolas Granatino’s claim on the estimated £100 million fortune belonging to his ex-wife, the German paper heiress, Katrin Radmacher.
Mr Hall outlined how one Hall Brown case involved a wife who had repeatedly persuaded her husband not to file for divorce, only to apply to end their marriage once they reached their fifth wedding anniversary and she became entitled to a six-figure sum.
Mr Hall added that, in another case, a multi-millionaire husband separated from his wife after being told by his financial advisors that he would need to pay her a “substantial” amount in the event they they divorced after celebrating five years of marriage.
“Being quite so administrative when it comes to divorce might well enhance the somewhat unromantic reputation which prenups have.
“It’s important to point out, though, that these are premarital contracts and there are individuals who treat these contracts in the same way as they would a commercial document.
“Such behaviour is not confined to the very wealthy who were traditionally more inclined to adopt prenups before the Radmacher case but the much broader group of people who now understand their importance.
“Despite the fact that prenuptial agreements can be of great use in reducing the acrimony which is a feature of some divorces by providing a structure for how spouses divide their assets, they do not necessarily eradicate it altogether and, as we have observed, are leading to couples almost diarising when they will part.”