Savvy couples sign up to protect their assets
The number of couples signing prenuptial agreements in Hong Kong is rocketing as people wed later and seek ways to protect their accumulated wealth and inheritance in light of a rising divorce rate.
Specialist lawyers are being asked to handle more prenuptial cases. One says the number increased tenfold in the last five years.
The number of postnuptial agreements - signed after a couple walk down the aisle - have also shot up, with self-made entrepreneurs and the second-generation rich being most likely to go down this route.
Lawyers now expect the number to rise even further following two landmark rulings by courts in Hong Kong and in Britain which have added legal clout to a prenuptial agreement and introduced the principle of equal sharing of assets in divorce settlements.
'I easily do around 30 to 50 prenuptials a year and about half that for postnuptials,' said Sharon Ser, a family lawyer and partner with the Hong Kong law firm Facey and Co in association with Withers. 'Five years ago, if I'd done five prenuptials and one postnuptial a year I would have thought it remarkable.'
Unlike many countries, such as New Zealand and Australia, Hong Kong has no legislation making a prenuptial a legal binding agreement. This means a divorce court does not have to follow any of the arrangements laid out in a prenuptial.
However, a ruling last month by Britain's Supreme Court gave the prenuptial a better legal status. The law lords upheld conditions set out in a prenuptial in a divorce settlement between German heiress Katrin Radmacher and her investment banker husband.
According to Jonathan Mok Chi-ying, a partner with Mayer Brown JSM, both these rulings look set to make prenuptial agreements more interesting to couples.
The Radmacher judgment was likely to have a knock-on effect in Hong Kong because the UK laws and statutes have a persuasive influence here because of the British colonial past, he said.
In addition, a ruling by Hong Kong's Court of Final Appeal - which introduced the principle of 'equal sharing' as a starting point in dividing up assets in a divorce - has made the prenuptial a more attractive proposition for those with sizeable pots of money they want to protect, Mok said.
'The Radmacher judgment is a landmark ruling and one that has been eagerly awaited. It is a conclusive Supreme Court decision on the validity of the prenuptial agreement and it is very likely that Hong Kong will follow suit,' he said.
'With these two judgments, I can see the floodgates opening with more and more people signing them, in Hong Kong as well as the UK.
Mok said those signing nuptial agreements tended to fall into two categories. 'There is the self-made type, like an investment banker or young entrepreneur, who wants to ring-fence their non-matrimonial assets that they acquired before marriage and even potential inheritance,' Mok said.
'The other type is the second generation of wealthy families where you have the patriarch or matriarch who doesn't want to see their hard-earned money being frittered away in a divorce after a short marriage.'
Ser believes it is Hong Kong's cosmopolitan outlook and the fact that many people are marrying later after they have already bought property and accumulated savings that is fuelling demand for nuptial agreements.
In the city, the average age at marriage went up by about five years between 1981 and 2006, to around 32 for men and 28 for women. However, there are now 2.5 divorces per 1,000 people a year, with 19,000 couples filing for divorce last year, compared to 13,500 in 2001 and 2,000 in 1981.
'There is a very different approach to finances in a marriage today,' Ser said. 'A lot of that has been a reaction to what has gone on in England, particularly with the changes as far as divorce is concerned. I believe the number of prenuptials has also increased because of access to information through computers, news, and anecdotes.
'There is always someone going through a divorce or just gone through a divorce. This means there is now a social network giving informal advice as well as lawyers giving the more formal advice.'
'I have no doubt that prenuptials are becoming more popular, as indeed I think they should be. I think it is very important that couples understand their finances before they get married and have some idea about their common financial aspirations.'
Winnie Chow Weng-yee, a family law specialist and partner with Hampton, Winter and Glynn, said in the week following the Radmacher judgment on October 20, she received three inquiries about nuptial agreements. 'Since then I have had more inquiries,' Chow said.
'There has definitely been an increase in nuptial agreements in Hong Kong, particularly where there is disparity of wealth, in second marriages, or where two young couples have premarital family assets and are both wealthy.
'Usually in those cases it is the parents saying to the couple we want to continue to give you gifts but we want to make sure your spouse doesn't get half of it. It's a sort of dynasty protection approach.'
'Divorce is on the increase and I think it is losing the stigma attached to it.
'People with assets are becoming more savvy and more alert to asset protection and what could happen to their wealth in the event of a divorce.'
Last year, 19,000 couples filed for divorce in Hong Kong. in 2001, 13,500 couples split but in 1981, it was just: 2,000