How safe is a prenup? Breaking it up can be hard to do, lawyers say
Prenups are supposed to be the ultimate divorce insurance for the wealthy. Yet like insurance, prenuptial agreements are often challenged when there's a claim.
The increasingly bitter and public divorce battle between hedge fund billionaire Ken Griffin and his wife of 10 years, Anne Dias-Griffin, centers on the couple's prenup, signed in 2002. In an Illinois court filing Tuesday, Anne Griffin said the prenup grants her only 1 percent of her husband's wealth. Ken Griffin, the founder of Citadel, is worth an estimated $5 billion.
Anne Griffin's legal claim to break the prenup centers on two arguments. First, she said that she signed the prenup under "duress and coercion" and under the "undue influence" of a psychologist who had a previous professional relationship with Ken Griffin. In the filing, she said she was given the prenup shortly before their wedding date and that she didn't sign it until three hours before the rehearsal dinner.
Her second argument is that the agreement is "unconscionable given the enormous disparity between the parties' respective assets, incomes and earning capacities."
A person close to Ken Griffin said the claims in the petition are inaccurate and misleading, and that Anne Griffin is trying to use their children as bargaining chips to secure a larger share of his fortune.
Such challenges to a prenup are common, according to divorce attorneys to the wealthy. Yet successfully breaking a prenup in court is rare.
"Prenups are exceedingly difficult to set aside," said Marshall J. Auerbach, a prominent Illinois divorce attorney who helped shape that state's divorce law. "Generally speaking, they are very safe."
The main reason prenups are so rock solid is the Uniform Prenuptial Agreement Act, which was adopted by the majority of states and makes it very difficult to toss out a prenup. The law sets out basic guidelines for drawing prenups and strengthens their enforceability, attorneys said.
Yet there are a few conditions under which prenups may be tossed out. Attorneys said the most common challenge is fraud, where a spouse undervalues or hides assets.
In her court filing, Anne Griffin said Ken Griffin made his financial disclosures to her three days before their wedding "thereby leaving Anne insufficient time to review and consider the financial disclosures."
Another popular challenge is the "coercion or duress" argument. This is Anne Griffin's main argument. She said that after she expressed unwillingness to sign the prenup, they had an argument and Ken Griffin became "so angry, violent and intimidating that he destroyed a piece of furniture in their home."
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Ken Griffin then recommended they see a psychologist to help them work out their differences, and the psychologist told her she was being "difficult" and urged her to sign the prenup, her court filing states. She later learned the psychologist and Ken Griffin had a previous professional relationship.
A person close to Ken Griffin said that Anne Griffin, a Harvard MBA, had hired Chicago's top divorce attorney to help her draft and sign the prenup and that over the course of her marriage was given "tens of millions of dollars." This person also said that the Griffins saw a psychologist to work through pre-marital jitters and that that they continued to see the psychologist throughout their marriage.
Auerbach said the coercion defense can be very strong, but it has to be "extreme."
"The courts have ruled that there is always some form of coercion when people sign a contract," he said. "So it has to be a very extreme form of coercion."
To break prenups, spouses sometimes use the "conscionable" argument. This means that the provisions of the prenup are too lopsided, with one spouse receiving virtually all of the assets. Still, Auerbach said prenups by nature are often lopsided, so the "unconscionable" argument rarely wins.
"If the wealthier party wanted it to be fair, they wouldn't enter into a prenup," he said. "Prenuptial agreements necessarily deal with degrees of unfairness. They give leverage to one side."
That doesn't mean that less wealthy spouses can't get more than the prenup offers. In the recent divorce of Wendi and Rupert Murdoch, for instance, Wendi Murdoch negotiated a larger settlement during negotiations involving their assets and children. The Griffin divorce also involves the custody of their children.
The prenup is just another hurdle for one side to overcome," Auerbach said.