Make sure your prenup is more than just cosmetic
Where there is family wealth, a prenuptial agreement can offer important protection and certainty, however a recent case - Ipekci v McConnell - has highlighted the importance of ensuring any agreement is done properly.
The wife was the great granddaughter of the founder of Avon Cosmetics and was the beneficiary of a number of trusts in the USA with a total value of $65m.
The couple met in New York where the husband was working as a hotel concierge. They began living together in London and married in November 2005.
Before the marriage, the wife asked the husband to enter a prenuptial agreement. The agreement was drafted by her private client lawyer and the wife arranged for the husband to have legal advice (from the lawyer who acted for her in her previous divorce). The husband first met the lawyer 3 weeks before the wedding.
The agreement provided that the law of New York would apply, no matter where the parties lived at the time. The husband was advised that the agreement heavily favoured the wife; indeed in the circumstances as they were at the breakdown of the marriage it gave the husband no entitlement to anything at all.
Despite all this the husband signed the agreement and the parties remained together until 2016 during which time they had had two children together.
When the parties separated, the husband was working as a concierge at a London hotel earning £35,000 a year. He had a 50% interest in his mother’s house in Turkey worth £50,000 and he had debts of £100,000 (mostly legal fees).
As well as interests in other family trusts, the wife had separate trust funds to the value of $4.45m. The judge found the wife was solely entitled to this, rejecting very late evidence from one of the trustees that the wife had only a life interest and that the trustees would not make a payment if the wife requested it.
The judge concluded that it would be wholly unfair to hold the husband to the agreement for several reasons.
- the agreement did not comply with the New York law that it professed to be governed by as it did not have the required certification. It would not have been upheld in New York, so why should it be upheld here?
- The husband’s solicitor at the time was not independent having previously acted for the wife, further the lawyer was not qualified to advise on the law of New York which was expressed to govern the agreement;
- The agreement did not meet the husband’s needs at all.
The judge took account of all the circumstances including:
- All of the wealth had been accumulated from sources external to the marriage so this was not a case for an equal division of the assets;
- The parties had had a reasonably high standard of living during the marriage;
- Due to the way the parties had organised their affairs the husband had made no savings or pension provision for himself;
- It was in the interests of the children that they could go to stay in a comfortable home with their father and that he was not seen as the poor relation.
The judge awarded the husband £750,000 for housing, but with £375,000 to be returned to the wife or her estate upon the husband’s death. He awarded a further £186,000 to meet his other capital needs including his debts, and a fund of £445,500 to provide for his income needs, topping up his earned income.
In getting to this point the parties had spent nearly £500,000 between them in legal fees, purely in relation to financial matters (excluding any proceedings about the children).
So whilst a prenup can help protect assets and reduce argument and legal fees on future relationship breakdown, if you take short cuts and don’t get the right advice, it might not be worth the paper it’s written on.
Hotel porter awarded £1.3 million divorce payout from Avon heiress ex-wife”