Pre-marital contracts

29/04/2005

Paul Gascoigne, Ray Parlour, George Best - are to name but a few marital casualties of recent times in the surreal world of high profile footballers. Whilst the relationships of such well known sporting celebrities may not be as dramatic as the TV's portrayals, the wealth and trappings in the popular soaps is nearer to the truth than you may think.

Football is a young man's game - as the cliché reminds us. Young men like girls and so nature takes its natural course, and a whirlwind romance soon blossoms into marriage. Welcome to the real world...or not quite as I have omitted an essential ingredient to the tale - money, money and more money...vast quantities of it !!!

Those particularly talented professional footballers come into untold riches very early on in their lives - and inevitably they are ill-equipped for all that entails. The top clubs are now very aware of just how vulnerable the players are to the more unscrupulous who prey on the financially inexperienced, and thus now assume a responsibility by ensuring financial mentoring by approved financial advisors, shrewd accountants and tenacious lawyers. The club therefore provides help and guidance to steer the young professional safe passage through the business world - where dog can eat dog if you are not careful.

However it is within personal relationships that the young footballing pup is left to find his own way in the world, and this can prove the most expensive mistake of his lifetime should he make the wrong choice.

Creating a pre-marital agreement

All is not lost - steps can be taken by the well advised before a lifelong commitment is made to the love of his life, in the form of a pre-marital agreement. Whilst these are not yet legally binding in England and Wales they are nevertheless extremely persuasive in the event a marital breakdown. Indeed it is the writer's belief that it is only a matter of time before such documents attain legal status. The writer and his colleagues at Irwin Mitchell have advised on more pre-marital contracts last year to professional footballers, and indeed business people at large, than ever before and so they are fast becoming a tool for survival in an all too unforgiving world.

Unfortunately too many young professional footballers marry without the security of a pre-marital contract. So what of his plight when it all goes wrong?

The celebrity couple inevitably lead an affluent lifestyle (think of Wayne Rooney) - luxurious house, designer clothes, fast sports cars, expensive jewellery, and so on. This is all financed through the young footballer's lucrative contract with his club. There is thus a significant disparity in the financial contribution to such a relationship.

On martial breakdown, the footballer will say the accrual of marital wealth was as a result of his exceptional talent and thus on separation he should retain the majority of the wealth. The wife will invariably say that she fully supported him throughout his career, during the good times (i.e. attending the many social functions expected of him outside football) and the bad times (i.e. during injury when he was so low he thought his career was over). She will say her contribution to the relationship was every bit as important as his and so no distinction should be drawn. For those of the spiritual persuasion remember the wedding vows "...with all my worldly goods I thee wed...". Add to the mix children, and you will see the solution is not so clear.

In such circumstances the Divorce Court has the unenviable task of trying to unravel the couple's financial affairs in a way that is considered fair.

There are of course different shades to fairness and so specialist legal advice and representation is essential. There are very few lawyers locally, let alone nationally, who have the knowledge and experience to handle such divorces and so choice of lawyer for both parties is essential - the best advice that can be given is to seek out such a specialist and do not assume any lawyer will do. Do your homework - make sure your lawyer has represented professional footballers or their wife's before. If not, find a lawyer that has.

So how do the lawyers begin to find the financial solution to such a high profile divorce?

The task is to try and balance the fabulous short term wealth and the parties' long term positions when the well is bled dry.

Whilst the footballer is still plying his trade the money continues to roll in (signing on fees, contract renegotiations, sponsorship deals) and so there is usually sufficient marital wealth to continue to support two households to a decent standard - the short term prognosis is therefore very often good.

It is when you try to factor in the long term position that the situation is less clear. Very often professional footballers live in the here and now spending their money like there is no tomorrow. Too little attention is paid to saving and investments. Likewise the footballer's wife is stereotyped as "high maintenance" matching her husband's penchant for spending. The most obvious example is the aforementioned Mr Rooney and his young lady who are forever in the press shown shopping here and there. However once a footballer's career is over in his early thirties the money is no longer available to sustain this lifestyle and that is where the real problems begin.

Thankfully the PFA has a good pension scheme in situ, and it used to be the case that the footballer could draw down his pension at 35 presenting him with a generous lump sum and a decent source of income to help him adjust to the real world in the aftermath of a successful career. However, that is all about to change. As of April 2006 the pension legislation is to undergo a radical overhaul, and the rules in respect of footballer's pensions are to change. The option is still there to draw down a pension at 35 but there are some catches - if the footballer draws down his pension at 35 he is now deemed to be retiring 20 years early and therefore a penalty of 20 years x 2.5% is applied (i.e. 50%). The lifetime allowance of £1.5 million is reduced by 50% to £750,000. Any excess fund above this amount is then taxed at 55%. In short the pension is hit hard on early retirement.

Whereas previously the separating couple could look to the PFA pension as an accessible fund post career, it no longer seems to be the case given the cost of early draw down.

Accordingly predicting the long term position of the divorcing couple when the professional footballer's career is over is by no means certain.

It is the Divorce Court's preference to achieve a clean break settlement wherever possible - i.e. a one-off settlement, usually by way of a significant capital settlement to the Wife.

However that is not always possible if such liquid capital is not available. In these circumstances the Divorce Court will look to redistribute such capital as is available to achieve fairness between the parties, and then look to the professional footballer's income going forward to provide the departing wife with some financial security. That income stream of course plummets at the end of a footballing career - no longer will Rio Ferdinand be able to negotiate a contract of circa £150,000 per week.

Reality is harsh and many a professional footballer struggles in the financial wilderness after a successful career. Nevertheless the cloth must be cut to fit and so both parties aspirations to a certain lifestyle must adjust to reflect such reality - no longer can the former wife expect maintenance of £50,000 per year, let alone can the ex-footballing husband afford it. He must adapt, retrain, find work, but so must she - he is not a meal ticket for life. Maintenance will thus adjust proportionate to income and so the illusion is shattered...

The above are merely some of the writer's observations having acted for many professional footballers (and their wives) over the years, and show some of the many challenges that must be addressed when it all goes sadly wrong in personal relationships - and in that respect the writer has never avoided a tackle.

Kevin Harris-James is a partner and divorce lawyer with national law firm Irwin Mitchell based in their Birmingham Office. He recently won the Birmingham Law Society Family Lawyer of the Year Award 2005, and features regularly in the media given his high profile client base and expertise in such matters.