Tiran Gunawardena

family law for footballers, part 2: pre-nuptial agreements

Tiran Gunawardena
family law for footballers, part 2: pre-nuptial agreements

Family law for footballers, Part 2: getting married

As we saw in Part 1 of our two-part series on “family law for footballers”, childhood sweethearts Reevaldo and Carolina recently began living together in London. Shortly after Carolina moved in, Reevaldo decided to propose, and Carolina said yes!

While this is, and should be, an extremely happy time in Reevaldo and Carolina’s lives as they plan for the next chapter in their relationship, there are serious legal considerations that professional sports persons with high earning potential should take into account prior to getting married.

Relying on insights from our expert family law team, we will discuss some key documents that sports professionals should consider asking their partners to sign – cohabitation agreements and pre- and post-nuptial agreements.

These documents may not be strong considerations for all couples, but they can be extremely important for footballers and anyone else in a relationship where the financial situation is unbalanced between the partners. The documents aim to protect an individual's wealth in order to protect themselves in the event that the relationship ends. While certainly not romantic, high-earning athletes should at least consider the advantages and disadvantages of these documents before tying the knot.

Reevaldo may have been pleased to hear that he could protect himself and Carolina if they broke up without ever marrying, by way of the cohabitation agreement. However, having considered his relationship with Carolina, he has decided to propose.

Legal background

The legal rights of married couples on divorce are far more extensive and generous than the legal rights available to unmarried couples on separation. England and Wales are infamous for having a legal system that is one of the most generous (to the financially weaker party) in the world.

In our recent post we reviewed the limited financial claims that Carolina would have upon separation while her and Reevaldo were living together and unmarried. In contrast, Carolina’s financial claims upon divorce would include property and/or other capital assets, pensions and income.

There is no set formula for calculating the appropriate financial provision on divorce. Instead, the court has a duty to consider all the circumstances of the case. The law sets out a number of specific factors that a Judge should consider but ultimately they have a very wide discretion. The case law over recent years has established a standard approach and generally, the starting point is that assets accrued during a marriage are divided equally, and the guiding principles applied are "equal sharing," "needs" and "compensation." The matrimonial home is normally considered a matrimonial asset, so is divided equally between the parties even if it was owned by one of them before the marriage.

In addition to these capital claims, either party could make claims for maintenance towards their needs (spousal maintenance) or their children’s needs (child maintenance) from the other. The needs of Carolina will be dictated by the standard of living during the marriage, her specific budget and Reevaldo’s ability to pay. Maintenance payments would be payable until the Court is satisfied that Carolina can be financially independent, or upon her remarriage or her death.

As a young footballer who owns his own home and has a significant income, and the potential to earn even more, Reevaldo is highly likely to be required to make significant financial provision for Carolina upon divorce including capital payments for her rehousing and monthly payments from his salary as spousal maintenance.

Reevaldo should, therefore, look at a way of protecting himself financially should his future marriage break down. It is with this background, therefore, that we consider nuptial agreements.

Pre or Post-Nuptial Agreements

A nuptial agreement, whether signed before (pre-nuptial) or after (post-nuptial) a wedding, is designed to provide the parties to the marriage with certainty as to what financial provision will be made on any future divorce. As Reevaldo is not yet married we will be concentrating on a pre-nuptial agreement.

How effective are they?

Recently, the courts have seen a large number of cases involving pre-nups and since 2010, have been heavily influenced by them, provided that the agreement is freely entered into, the consequences are fully understood by both parties, and it is not significantly unfair to one party.

However, despite their influence, it is important to understand that these agreements are not fully binding on family courts, although this may change in the future. Therefore, unfortunately and unromantically, as the law currently stands, the best legal protection for Reevaldo’s financial assets and future income is to never get married.

Similarly to cohabitation agreements, there are a number of principles that if met will maximise the chances of a pre-nuptial agreement being binding:

  • the agreement is freely entered into;
  • the implications of the agreement are fully understood;
  • the agreement is fair in the circumstances and meet both parties’ needs;
  • the agreement is legally valid and properly signed and executed;
  • each party is represented by a solicitor who signs to confirm they have provided each party with full advice;
  • clear financial disclosure is provided;
  • the terms provide adequate support for any children; and
  • the agreement is finalised at least 28 days before the wedding ceremony.

You will notice a lot of similarities in the language between cohabitation agreements and pre-nup agreements. The need for “fairness”, independent legal advice, financial disclosure, etc. are subtly different but equally important in both situations. Here, though, we will look at the factors we would need to consider for Reevaldo’s protection.

Drafting considerations

Purpose of entering the agreement

This aspect of the agreement would set out the context of the agreement, and give an opportunity to display to the courts (if there were any future dispute) the intention of both the parties in the event of a divorce, strengthening the chance of its provisions being followed. We would record the reasons for both the parties entering into the agreement on the face of it. We would seek to show that Reevaldo was, through the agreement, intending to meet Carolina’s reasonable financial needs in the event of the dissolution or annulment of the marriage, or the death of Reevaldo.

Further, we would record Carolina’s understanding that she understands what she is entitled to, but record that she would rather agree the financial provision as set out in the agreement, based on the length of marriage and whether or not there are any children.

Potential Terms of the Agreement

Income

The single biggest difference between Reevaldo and Carolina is their earning capacity. Carolina has uprooted herself to a new country with all the challenges that presents before she has a degree or significant work experience, and is currently unemployed, with significant outgoings by way of her education and living expenses. Reevaldo in contrast is earning a basic wage of £40,000 per week and will hope to earn significantly more as his career progresses.

It would be advisable, therefore, to have a spousal maintenance clause stating that each party keeps all income generated by that party as their own, separate property, giving no rise to a share in it.

In the event that the pair divorced, it would be in Reevaldo’s interest to achieve a ‘clean break’. This would mean paying enough to Carolina as a one off payment in place of any future long-term maintenance payments towards her.

The agreement could set a figure for Carolina’s agreed income needs and also provide a timeline for when she would be in a position to earn her own income and how much. This would separate Carolina’s income needs from Reevaldo’s income with the aim to limit the effect of the couple’s standard of living (which would otherwise be relevant to any spousal maintenance claim), and would greatly assist in limiting Reevaldo’s exposure in this regard.

Property

The agreement would also seek to limit Carolina’s housing need rather than allowing it to increase as Reevaldo’s career progresses and the family homes become more and more luxurious. There are various methods that this could be achieved, one example is to record that Carolina’s housing need is limited to a 2 bedroom property within 10 miles of the matrimonial home. The clause could vary depending on the length of the marriage and would usually include an automatic variation upwards if Reevaldo and Carolina were to have children.

Children

As Reevaldo and Carolina are currently unsure as to whether they will have children in the future, the pre-nuptial agreement will not usually include specific financial provision but would instead set out the guiding principles. These could confirm that Reevaldo would pay their school fees and allow for child maintenance to be agreed at the time.

It would also be important to have a number of events which would trigger a review. Reevaldo’s prospects look bright, but one broken leg or a fall from grace, and he could be locked into to paying more than he could afford. Transfers, injuries, passing of so many years to reflect a different stage of his career would all be important from his point of view, and should be envisaged now to avoid disputes later.

International aspects

It is important that the agreement and the advisors properly consider the international lifestyle of a footballer and the specific ties Reevaldo and Carolina have to Brazil. Reevaldo and Carolina currently live in England, but this may change in the future if Reevaldo signs for another club or if they return to Brazil. The pre-nuptial agreement can include a jurisdiction clause that selects which country’s laws will govern any future divorce regardless of what country the couple are living in. However, it would usually be recommended for Reevaldo to also take advice in Brazil to ensure that the pre-nuptial agreement would be enforceable under Brazilian law. Mills & Reeve are well-positioned to advise on international family law issues.

Conclusion

Provided that all the formalities and precautions were taken in respect of negotiating the agreement, it would be for both parties to sign, and hopefully never to need to use. If, unfortunately, it did need to be used, it would be for the courts to decide the weight to attach to it. However, by taking specialist advice, Reevaldo will put himself in the best position possible.