Wealth Solutions & Wealth Planning
The importance of planning pre-nups
Marcus Dearle of Berwin Leighton Paisner
Jun 16, 2015
Broaching the subject of pre-nuptial agreements can be a difficult topic. But it's a conversation worth having, if HNW or UHNW families are to avoid major potential complications in the future, says Marcus Dearle of Withers Hong Kong.
Raise the subject
“Many HNW or UHNW family members are very concerned about how to broach the subject of a pre-marital agreement with their son or daughter,” says Marcus Dearle, a partner and the managing director Asia at Withers Hong Kong.
It’s wise for relationship managers to raise the concept of pre-nups with clients early.
“When a banker hears that the child of a HNW or UHNW client is getting married they should advise the client to consider getting professional legal advice to discuss whether a pre-marital agreement is appropriate for the child’,” says Dearle.
He adds: “I often have meetings with the patriarch or matriarch and usually volunteer to speak initially to the person who is marrying, as well as their partner, about the proposed arrangements. Sometimes, I’m instructed to raise it for the very first time.”
Trusts can be vulnerable to attack in a divorce context
Getting a trust correctly structured is the key to prevent it being vulnerable in a divorce. “Trusts can be very effective asset protection vehicles, even in a divorce context. But they do not always protect your wealth in the event of a divorce,” says Dearle.
“If a trust has a husband and wife listed in the class of beneficiaries, for example, it is likely that all or part of the trust fund will be treated as a resource in a divorce for example. In those circumstances it is even more important that you have a pre-marital agreement. Trusts that are genuinely dynastic are more likely to be effective from attack, but to be truly dynastic is likely to involve the settlor not being a beneficiary.”
Different countries, different rules
Different jurisdictions in Asia have varying levels of sympathy for the financially weaker partner in a divorce.
“The Hong Kong courts are likely to be far more generous than any other courts in Asia for the financially weaker party,” says Dearle. “Many people are worried they could be affected by the jurisdictional hook of ‘special connection’ that enables the weaker party to file divorce proceedings in Hong Kong, even if they are not based in Hong Kong.
“Another often ignored but crucial fact is that the Hong Kong divorce court also has power to vary the terms of some trusts, and if there are Hong Kong-based assets in circumstances where there is a variable settlement, the fact the trust is based offshore might not make any difference,” says Dearle.
“The upshot is that wealthy families are increasingly looking at entering into international pre-marital agreements. Thinking outside the box, thinking internationally and planning sensibly and responsibly, is vital,” he says.
Partner, Head of Family Asset Protection - Private Client at Berwin Leighton Paisner
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