Using Prenuptial Agreements for Wealth Protection

The position under the Matrimonial Property Act of Kenya (the Act) is that when a marriage is dissolved, the matrimonial home, household effects and assets jointly owned and acquired during the marriage are considered as “matrimonial property” which is to be divided between the divorcing parties based on the contribution of each party towards the acquisition of the asset. The general presumption for an asset held jointly by a married couple is that there may have been equal contribution and as such there is to be equal division unless proved otherwise. In relation to any other asset acquired by one spouse, whether before or after marriage, which is not matrimonial property, such as a commercial property or shares in a company, if the other spouse has contributed to the improvement of that property then the contributing spouse may also acquire a beneficial interest in that property equal to the contribution made.

A contribution could be monetary as well as non-monetary, such as companionship, child care and housework, amongst others. It is difficult to put a proportionate value to non-monetary contribution and it is up to the court to establish based on evidence provided.

If individuals considering marriage do not wish for the asset distribution provisions of the Act to apply, then they may choose to voluntarily enter into a contract before their marriage setting out what their respective rights in relation to assets would be should they divorce in the future. Such agreements, generally known as prenuptial agreements, are valid and binding in Kenya.

Prenuptial agreements are effective in protecting certain assets, whether acquired prior to or after marriage, from being subject to division between a couple upon their divorce. For example, a shareholder owning a business with his father and siblings could exclude his shareholding from the assets his future wife could make a claim against during divorce proceedings. This would protect the family business from being ultimately part-owned by a bitter former spouse.

Another example where a prenuptial agreement would be useful is where one party stands to inherit valuable family real estate and the party does not want it to be subject to division on divorce. A final example would be where one wealthy party with substantial investments does not wish for all the current and future investments to be divided upon divorce. Again, these assets can be protected under a prenuptial agreement.

The drafting of prenuptial agreements requires careful consideration, careful drafting, full disclosure and sound independent legal advice for each party involved, such that there is no possibility of an agreement being set aside on the grounds of duress, coercion, fraud, the terms being manifestly unjust or a party not having understood the consequences of entering into such an agreement.

The court in MBK v. MB (2016) (a Kenyan case relating to matrimonial proceedings) recognised a prenuptial agreement entered into by a couple prior to their marriage and gave effect to its terms. This area is still new in Kenya, in contrast to other jurisdictions where prenuptial agreements have been recognised for many years and the law has developed through case law.

In England, interestingly, prenuptial agreements are not binding but the court will consider such an agreement during divorce proceedings. The Supreme Court of UK in the leading authority of Radmacher v. Granatino (2010) held that so long as the parties enter into a prenuptial agreement freely and with a full appreciation of its implications, the court should give it effect unless it would be unfair to hold a party as being bound to the agreement based on current circumstances which would not have been anticipated or taken into consideration when they entered into the agreement.

A prenuptial agreement can be an effective tool for wealth planning and protection provided that it is drafted with foresight and fairness.

Should you have any questions regarding the information in this article or any other employment matters, please do not hesitate to contact Atiq Anjarwalla or Mona K. Doshi

 

Atiq Anjarwalla
Senior Partner
ALN Kenya | Anjarwalla & Khanna
asa@africalegalnetwork.com
Mona K. Doshi
Partner
ALN Kenya | Anjarwalla & Khanna
mkd@africalegalnetwork.com

The content of this alert is intended to be of general use only and should not be relied upon without seeking specific legal advice on any matter.

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