- What is a Postnuptial Agreement?
A postnuptial agreement, or “Postnup”, is a legal document entered into after your marriage or civil partnership has taken place (in contrast to a prenuptial agreement, or “Prenup” which is entered into in advance of your marriage or civil partnership).
The aim of the Postnup is set out what will happen to your finances if your marriage or civil partnership breaks down. Your marriage does not need to be in difficulty before you can consider entering into a Postnup.
- What does a Postnup deal with?
A Postnup should always be tailored to your and your spouse’s unique circumstances but common matters to be dealt with are as follows:
- What would happen to your family home(s);
- How joint assets would be divided;
- How assets brought into the relationship by one party would be divided;
- How assets inherited by one party would be divided;
- How pensions would be divided;
- How the responsibility for debts incurred before or during the marriage or civil partnership would be divided;
- How shared business interests would be dealt with (including for example, voting rights, and roles within the business); and
- Whether one party would pay or receive spousal maintenance and, if so, how much, and for how long.
- Is a Postnup legally binding?
Postnups are not legally binding in the UK (though they are legally binding in many other jurisdictions). However, if certain conditions are met, UK Courts are likely to enforce Postnups, provided that they do not seek to leave either party unable to meet their needs. The concept of a person’s “needs” is flexible, and it is referable to the standard of living enjoyed during the relationship. Therefore, a party may legitimately have a “need” for so many long-haul foreign holidays per year, for example.
Provided that “needs” are provided for, a Postnup is likely to be enforced if the following conditions are met:
- The Postnup is signed and executed as a deed;
- Both of you have entered into the Postnup voluntarily, without one party having applied pressure on the other;
- Both of you have made full and frank financial disclosure – which includes details of all assets (including inheritances), liabilities and incomes, supported by documentary evidence; and
- Both of you have received independent legal advice. While independent legal advice is not essential, the Courts have described it as “desirable”.
- Are there any risks involved in Postnups?
- Tension – the process of agreeing a Postnup can introduce tension into a relationship which was otherwise harmonious.
- Unenforceability – no one can be 100% certain that their Postnup will be enforced, as Postnups are not legally binding in the UK.
- Legal Costs – Postnups can be expensive documents to produce. The party who introduces the idea of the Postnup often has their own legal costs to pay, but they may also be advised to provide a fund for the other party to obtain independent legal advice. The legal costs very much depend on the level of contention between the parties. It can be difficult for solicitors to accurately estimate the costs involved in a Postnup but a best estimate should be provided at an early stage and revised if appropriate.
- Changes in Circumstances – once a couple has signed a Postnup, the Postnup should be updated when there are significant changes in circumstances (such as additional children, significant changes in one party’s income, and significant changes in one party’s needs). If a Postnup is not updated to reflect changes, there is a heightened risk of unenforceability.
- How might a Postnup simplify separation decisions?
- Asset protection – A Postnup may help you to protect your assets and business interests, which may be especially desirable where assets have been generated solely through your individual efforts, or where assets have been inherited.
- Financial security for both parties – a Postnup can not only help to ringfence assets, but it can also provide more financial security for the financially weaker or non-working spouse, for example, by stipulating the level of spousal maintenance payable.
- Dispute reduction – a Postnup should give both parties greater certainty as to financial rights and responsibilities. This can reduce the scope of any financial disputes upon relationship breakdown.
- Who might wish to consider entering into a Posnup?
Any person who is married or civil partnered may wish to enter into a Postnup, however Postnups are likely to be particularly beneficial to the following individuals:
- Business owners who are concerned about how their business would be divided upon separation;
- Those who anticipate their business suddenly taking off and becoming very successful (this may include founders and investors in start-up businesses);
- Those who anticipate that significant financial changes will occur during the course of their marriage, such as those who expect to receive significant inheritances, or investment windfalls, or who anticipate that their earning capacity has or will reduce or fall away (through, for example, health reasons, or time spent away from employment to raise children);
- Those experiencing difficulties in their relationship, who wish to agree a framework to get the relationship back on track and to define each party’s responsibilities;
- Those who wish to protect the financial security and inheritance of children from previous relationships; and
- Those who are married to a spouse who has significant debts, or who is likely to incur significant debt during the relationship.
- How to find out whether a Postnup is right for you.
As soon as you are married, you may enter into a Postnup with your spouse if your spouse agrees to do so. If you don’t feel that the time is right shortly after your marriage, the option remains open to you at any future time.
You may wish to consider obtaining preliminary advice from a reputable solicitor in the first instance, to find out if a Postnup may be worthwhile. A solicitor will also be able to provide you with some advice as to how to broach the topic with your spouse.
If you are the spouse who has been asked to enter a Postnup, it may come as a shock. However, is not necessarily a sign that your marriage is in trouble, or that your spouse is trying to exclude you financially, it may simply be their attempt to avoid a litigious divorce (which they may have been through previously), and to simplify separation decisions.
For further information, please contact Kate O’Callaghan, Associate in the Family Department or, alternatively, telephone on 020 7465 4300.
To learn more about Prenups and Postnups, you can download a free copy of our Essential Guide to Prenuptial and Postnuptial Agreements here.
To learn more about divorce and separation you can download a free copy of our Essential Guide to Divorce and Family Law here.
To access our dedicated webpage with free Essential Resources for Supporting and Protecting Vulnerable Clients click here.
To learn more about Modern Family Law visit our dedicated webpage and download a free copy of our Essential Guide to Modern Family here.
