BBC Capital

Breaking up is hard to do — financially

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Andrea Murad is a freelance investing and careers writer based in New York City.

  • Prenuptial agreements around the world...

    Planning a wedding is stressful enough, so for many couples, considering how they would handle the financial fallout of a split is hardly on their minds ahead of the big day.

    But that might be changing. With a growing number of international marriages has also come an increase in the prevalence of prenuptial agreements, say some lawyers who specialise in matrimonial law.

    A prenuptial agreement or ‘pre-nup’ is a legally binding contract which can outline how finances and possessions would be split and handled if a couple divorce. In some countries, these agreements have existed for hundreds of years while in others, they’re relatively new. In addition to protecting each partner’s assets, these agreements can be designed to protect family money, companies or real estate.

    “One reason for a pre-nup is to create clarity and protection of wealth and assets — clarity, that is to have a clear arrangement on how the family partnership will operate,” said Jeremy Morley, an international divorce lawyer based in New York.

    Morley said pre-nup discussions can open the door to how couples expect to run their financial affairs during their marriage. “All over the world, people don’t talk about money, but it’s very hard to predict the future and how relationships will change,” he added.

    Without a pre-nup, the courts will decide how marital assets are divided after a split according to a country’s laws. “Pre-nups are insurance policies against high lawyer fees,” said Randy Kessler, partner at Kessler & Solomiany, a law firm in Atlanta. In Kessler’s opinion it is unlikely that the other side will spend a lot of money if a pre-nup exists.

    But before entering into a pre-nup, spouses need to consider which assets they want to protect or the financial support they would need to maintain their current lifestyle if they were to separate from their partner. Agreements can also include sunset provisions that will make the pre-nup invalid after a certain period of time. And married couples can even enter into a post-nuptial agreement after they are married that acts in a similar way to a pre-nup.

    BBC Capital spoke to family law lawyers in the United Arab Emirates, France, Germany, Japan and the US for more information about how these agreements work around the world. Scroll through the images above to see the ins-and-outs of pre-ups in those countries.

    (Getty Images)

  • United Arab Emirates: Sharia law and contractual obligations...

    Only UAE nationals, or Emiratis, marry under UAE law. The country follows Sharia law, and this is outlined in the Quran.

    In 2012, according to the UAE National Bureau of Statistics, 8,753 or 59% of the 14,934 marriages were between nationals, while 2,351 or 60% of the 3,901 divorces were between Emirati couples. For every 3.7 Emirati marriages that year, there was one divorce.

    “Islam provides an entire regime in and of itself,” said Jeremy Morley, an international divorce lawyer based in New York. “Marriage is a contract, and you are required to have a contract that will regulate within the consequences of divorce.”

    The marriage contract under Sharia law is already a type of a pre-nuptial agreement. It starts with the Mahar (dowry), which has two parts: an accelerated dowry is paid upfront at the time of the marriage to cover any wedding expenses and a late dowry is paid at divorce or following the husband’s death.

    To encourage Emiratis to marry other Emiratis, the late Sheikh Zayed bin Sultan Al Nahyan, the former UAE president, set a limit on dowries to prevent Emirati grooms from slipping into debt. Currently, the accelerated Mahar cannot exceed AED 20,000 ($5,445) and the late Mahar has an AED 30,000 ($8,168) limit — a total of AED 50,000 ($13,613). Since currency tends to lose value, many brides ask for this money in gold.

    “[The contract] sets up exactly what the woman will be paid upfront and at the end of the marriage,” said lawyer and legal consultant Diana Hamade, founder of International Advocate legal Services based in Dubai. “If the man can prove that the woman contributed to the end of the marriage, she won’t get paid the dowry.”

    The husband would have to prove that his wife caused him harm by neglecting him, by spending too much money or by going out too much, for example. A UAE woman is able to leave a marriage voluntarily and obtain a Khula. But without being able to prove harm, she would have to give up everything, including wealth and children, and repay her husband for everything he had bought for her during the marriage, Hamade said.

    Child custody and support is not addressed in the marital contract — but these are very detailed in the law and are not left to the judge’s discretion. Often, when there are children involved, a woman will usually maintain custody and manage the children’s day-to-day activities, and from her ex-husband, she will receive an apartment and child support payments.

    Non-Muslim expats who marry in the UAE will often draft pre-nups that follow the laws of their homeland.


  • Germany: Where pre-nups are more the norm...

    Pre-nups are fairly common in Germany — about a third to half of engaged couples sign these before marriage, especially when one partner is self-employed or has significantly more wealth than the other.

    The number of couples marrying has been about the same -- the number has hovered between 370,000 and 390,000 for the past decade. About 179,000 couples divorced in 2012 a decline of about 4.5% from 2011. Those who divorced in 2012 were married about 14.5 years on average, according to German’s Federal Statistical Office (Destatis).

    German couples can enter into a contract prior to marriage and choose how they want their assets held. Any time after the marriage, a couple can enter into a new contract to change the legal regime. In a separation of property system (Gütertrennung), each spouse’s assets and debts from before and during the marriage are kept separate. The community of property system (Gütergemeinschaft) is just the opposite — the couple shares all assets and debts from before and during the marriage.

    If no choice is made, couples are automatically put into a community of accrued gains system (Zugewinngemeinschaft). In a divorce, the couple shares only their profits.

    “Not everything you earn in the marriage is common good, but there’s an equalization of accrued gains,” said Britta Schönborn, lawyer and certified family law specialist at Schneider Stein & Partner in Hamburg.

    If one spouse owns a property before the marriage, for example, and its value has increased from the beginning of the marriage, upon divorce, the owner would have to give the other spouse half the value of that increase. If one spouse lost money during marriage, the other spouse doesn’t share in the debts.

    Retirements aren’t necessarily included in divorce settlements — ex-spouses receive a fixed payment from the state pension plan depending on the length of the marriage. Private pension plans are also divided similarly to other assets, with each partner receiving half of the pension’s accrued gains during the marriage.

    “Without a pre-nup, the pension rights or retirement assets are to be split between partners,” wrote Schönborn in an email.

    In a pre-nup, couples can also exclude splitting pensions or change how pensions are split if they want. Although German civil code mandates child support, a pre-nup can provide that the custodial parent receive spousal support for an extended period, until the child reaches a certain age.

    Once the contract is finalised, the couple signs the pre-nup in front of a notary, who is trained in the law and acts as a neutral party. When a pre-nup for a young couple doesn’t address the area of children, for example, the notary will ask what happens if expectations change — whether the couple would like to include other provisions.

    “If a pre-nup is drawn up under the condition that one partner didn’t have the chance to negotiate, if the content of the pre-nup is completely one-sided, the court will say there’s no balance in the pre-nup and it’s an unfair contract,” said Schönborn. This means the judge will likely alter the divorce settlement so that the less-well-off partner receives some compensation.

    Although couples aren’t required to disclose their assets when they sign the contract, if caught hiding assets, the hiding spouse risks criminal prosecution and could potentially lose the right to spousal support.


  • United States: Courts, mediation and complications...

    American couples divorce by court proceedings or mediation, and the process can be lengthy depending on the complexity of the marital estate. Even though each state has its own divorce laws that determine how to divide a couple’s assets, pre-nups can change this. But negotiating an agreement can be a complicated process.

    Marriage and divorce in the US are on the rise. While about 2.1 million couples married in 2011, or 6.8 marriages per every 1,000 people, according to the Centers for Disease Control and Prevention, about 877,000 couples divorced — about 3.6 divorces per every 1,000 people.

    “A pre-nup discussion in the US is very lengthy — each side has separate lawyers and it can be very difficult to draft an agreement,” said Morley.

    Without a pre-nup, the state where the couple filed for divorce determines how the couple’s assets are divided. Some states have “community property”, where all money earned in the marriage is divided 50/50, said Kessler, while others states have an “equitable division” — the assets are divided by what’s fair which may not be an equal split.

    While pre-nups follow the laws of the state where they’re drafted, the marital estate is defined by the state where the divorce is filed unless the pre-nup specifically states otherwise, which is often the case.

    Each state defines marital property differently, and the marital estate generally includes what was earned during the marriage except for any inheritances titled in only one partner’s name. The marital estate can include investments, retirement assets like 401(k) saving accounts and pensions, along with purchases of big-ticket items, such as houses and cars, made with money earned while married, as well as any gifts to the couple. Any gifts to one spouse may be kept separate from the marital estate. Pre-nups can help protect these assets or determine how they will be divided.

    Each partner must disclose all his or her assets in the pre-nup for it to be enforced. “You don’t want the other side to say they didn’t know how much money you had,” said Kessler. “You disclose what you have to make sure it’s a fair negotiation — this helps make it easier for a judge.”

    Although child support and custody is determined by the courts and strictly enforced, these agreements can limit the amount of spousal support and the duration.

    “The number one reason people have pre-nups is to avoid paying alimony,” said Kessler.

    Pre-nups can be thrown out if they’re signed under duress, but this is very difficult to prove. “Even signing it the day before the wedding is not [considered] duress — you can still back out of the wedding,” he said.

    Post-nuptial agreements are the natural follow-up to pre-nups, according to lawyers. Couples enter into these agreements if there wasn’t sufficient time to negotiate a pre-nup prior to the wedding or if they’ve reconciled in the middle of divorce proceedings, for example.

    (Getty Images)

  • Japan: Where courts take a back seat...

    Most Japanese couples don’t divorce through the courts. The procedure, called kyōgi rikon, is very administrative. Couples who agree to divorce instead file registration documents with a local municipal office. Pre-nups are very rare in Japan because couples rely on the country’s detailed civil code to determine how to divide their assets.

    Marriage in Japan is on the decline while the number of divorces has held steady for the past decade. In 2011, there were about 662,000 marriages and about 236,000 divorces, according to the Japanese Ministry of Health, Labour and Welfare — or one divorce for every 2.8 marriages that year.

    “All the statutes offer many provisions for divorce,” said Tokyo-based lawyer Hirohito Kaneko. “The statute of the family court is very clear [regarding] the division of marital assets.”

    In a divorce, all assets that were acquired during the marriage, excluding any assets earned prior to the marriage, or any inheritances or gifts, are divided between each spouse. Japanese law doesn’t provide for spousal support.

    “He pays her a modest lump sum just to get divorced,” said New York lawyer Morley. “That’s usually the end of it — he’s divorced from his wife and children. There’s very little visitation by the non-custodial parent in Japan, but this is slowly changing.”

    Pre-nups are more popular in marriages between a Japanese citizen and an international person. These marriages tend to be more complicated. The couple’s assets could be spread throughout several different countries, and the couple may decide to stay in Japan or move to another country in the future.

    “Japan has freedom of contract, and [couples] can split assets however they want — they can make their own deal,” said Morley. “The civil code in Japan provides that assets created during the marriage are to be divided equally after the marriage.”

    Although the agreement addresses the division of assets and spousal support, it does not address issues regarding children, like custody matters and child support. Child support is determined by the civil code, but is rarely paid and it is difficult to enforce payment.

    To date, there hasn’t been a case that tested pre-nups in Japan. “It’s very unusual for court cases in Japan to be tested,” said Morley. “The pre-nup agreement would give more certainty.”


  • France: Defining the terms upfront, sometimes by default...

    Marriage isn’t as common in France as it is in other countries because many couples live together in civil unions (pacte civil de solidarité) that afford them some of the same rights as married couples. Even so, there were about 237,000 marriages and about 133,000 divorces in 2011, according to France’s National Institute of Statistics and Economic Studies and France’s Ministry of Justice.

    In France the division of ‘who owns what’ during a marriage is laid out right from the start. Before getting married, most French couples will decide whether to share financial gains and losses made during the marriage — and they sign off on that in front of a notary, a lawyer with a special appointment. This document doesn’t list any assets — that’s all discussed during a divorce.

    “They are basically standard documents without a lot of financial detail,” said Jill Schofield-Thommeret, partner at Douma, Schofield & Sibenaler based in Paris.

    Couples can sign a contrat de mariage (marriage contract) before they tie the knot. It’s a simple form that outlines the couple’s choice between four marital regimes:

    --COMMUNAUTÉ LÉGALE (legal community property): The marital estate is limited to property acquired and debts incurred after the marriage, but does not include inheritances or gifts. This is also the default if a couple doesn’t sign a marriage contract.

    --COMMUNAUTÉ UNIVERSELLE (universal community): Everything from before and after the marriage, including accounts, assets and liabilities, becomes community or shared property

    --SÉPARATION DE BIENS (separation of assets): Everything is kept separate during the marriage. Although spouses don’t benefit from one another’s success, they also don’t pay the consequences of one another’s bad luck.

    --PARTICIPATION AUX ACQUÊTS (participation in acquired assets): Similar to séparation de biens during the marriage, but in a divorce, the value of the acquired assets is shared. The less-well-off spouse receives half the appreciation of the other spouse’s enrichment. Spouses do not share in each other’s losses — the worst-case scenario is that one spouse receives nothing from the other.

    “A pre-nup says whether you’re in one system versus the other, then the spouse will redress the less-well-off spouse,” said Alain Cornec, partner at Villard Cornec et Associés based in Paris.

    About 90% of couples choose the default communauté légale option, while only 6% to 8% of couples choose séparation de biens and only 2% to 3% choose participation aux acquêts. Couples can change their marital regime after their second anniversary or two years after the last change. Those remarrying almost always choose to keep assets separate, the lawyers said.

    These marital agreements are always upheld. A couple’s assets and spousal support are discussed during the divorce proceedings rather than before the marriage. “In a community of property [regime], if you hide your common assets at divorce or succession and the other spouse can prove it later, you lose 100% of the asset,” Cornec said.

    The country’s civil code requires spousal support if needed. The court will grant the less-well-off spouse some level of compensatory support, designed to help the spouse get back on his or her feet and to try to offset the consequences of divorce, said Cornec. “Once set, it cannot be revised unless you’re in a hardship situation.”

    The French have generous state benefits, with much of a person’s retirement coming from the state system. Depending on the length of the marriage, an ex-spouse will receive a portion of the other’s pension.

    (Getty Images)