Protecting your financial future with a post-nuptial agreement

A postnup is a bespoke legal contract between two people (in this case married or civil partners) who wish to regulate what will happen to their assets, liabilities and other financial matters in the event of a divorce or separation. By entering into this agreement, couples are able to establish clear guidelines for their future, in the hope of avoiding the uncertainty, cost and delay associated with divorce litigation. 

In England and Wales, neither prenups or postnups are automatically legally binding. However, the courts are giving increasing weight to them provided certain safeguards are met. These include:

1. full and frank financial disclosure – each person should disclose their assets, liabilities and income fully and honestly with the other
2. independent legal advice – each person should be independently advised on the content and effect of the agreement before signing the agreement
3. being entered into freely – there must be no duress, pressure or undue influence placed on either person to enter the agreement
4. fairness – the agreement must still be ‘fair’ overall at the time of separation. This has been interpreted by the courts to mean that both people’s needs should be met, but what those ‘needs’ are will vary from case to case

People enter into post-nups at different stages of life depending on their particular circumstances. For some couples, agreements are entered into shortly after marriage whereas for others, it could be decades before they enter such an agreement. A few of the common reasons we see couples instruct us to prepare postnups are below.

1.    No prenuptial agreement 

It is not uncommon that couples who fully intended to enter into a prenup before their wedding do not get around to signing one before their marriage. Provided both people agree, we can prepare a postnuptial agreement in the same terms that a prenuptial agreement would have covered and sign this months or even years after the date of marriage.

2.    Change of financial circumstances

Postnups can be useful where one or both people have had a significant change of financial circumstances during the marriage such as:
•    setting up or growing a business
•    increasing their income
•    sacrificing their career / decreasing their income
•    receiving a gift or inheritance from family

3.    Change of life circumstances

Over the course of a marriage, so much can change and many couples elect to enter into a postnup to reflect this new change of circumstances.

Examples of this include:

• having children
• illness / disability
• change in relationship dynamics 
• estate planning e.g. protecting the interests of children from prior to the marriage

4.    Securing pre-nuptial agreement signed close to the date of marriage

If a prenup has been entered into shortly before the marriage date (usually within 28 days is taken a rule of thumb) there is a risk that it will be perceived as signed under duress or undue pressure and therefore vulnerable to challenge. In those cases, it is sensible to enter into a postnup after the marriage date confirming the couple’s intention for the prenup to be upheld. The fact the couple has chosen to reaffirm the terms after the marriage (with no time pressure) can be an important factor to counter future allegations of duress.

Marriage comes with significant financial consequences. Couples contemplating prenups often face the dilemma that if they cannot agree on terms, they may not get married at all. For the financially ‘weaker’ party, entering into a prenup, even on unfavourable terms, may feel ‘better than nothing’, especially if a wedding is looming or the prenup offers them more protection that they would have as an unmarried couple.

For postnups, the starting point is usually different. Once the couple is married or become civil partners, they will be automatically subject to the default family law that applies in the event of a divorce/dissolution. If they wish to contract out of this i.e. be entering into a postnup, both need to agree on the terms. Understandably, the financially weaker party is often less incentivised to enter into a postnup and this means less bargaining power for the financially stronger party. 

Such challenges can often be overcome by emphasising some of the advantages of postnups that benefit both spouses/civil partners (e.g. greater certainty and ability to plan, reducing the risk of litigation) and ensuring that the postnup is still fair to both people.

Our family team has wide experience in advising a broad range of people on pre and post-nuptial agreements, from mid-income couples to high net worth individuals or those with international ties. Whether you’re just starting to consider your options or you’re ready to enter into a nuptial agreement, we can guide you through the process and help you find the right path forward for your family.