What are Prenup and Postnup Agreements?

Nuptial agreements have seen a rise in popularity in the UK, with high profile divorces highlighting the risks of not having a prenup or postnup in place. In addition, people now tend to get married later in life when they have accumulated more wealth and therefore have more assets to protect.

Claire Porter, partner within the family team at leading Cheshire-based law firm SAS Daniels, discusses nuptial agreements for pre and post-marriage...

What is a prenuptial agreement?
A prenuptial agreement is a contract that couples enter into before marriage. It ensures that there is a clear plan in place with regard to what will happen to assets that either person brought into the marriage or future inheritance in the event of divorce. For example, whether such assets should be treated differently than assets that the parties build up together during their marriage.

Why do I need a nuptial agreement?
Once married, all assets are thrown into a 'matrimonial pot' and are up for division between the parties. Nuptial agreements are often drafted before second marriages, particularly where there are children from the first marriage.
By entering into a nuptial agreement, certain assets can be excluded from the matrimonial pot, to ensure that children's inheritances are left intact in the event of divorce or death.
Younger couples entering into marriage for the first time are also taking out a nuptial agreement which can be used to protect wealth from the 'bank of Mum and Dad' which can arise in circumstances whereby parents have helped their children buy a property, or the couple are likely to receive large gifts of money, shares in a company/family business, or future inheritances/windfalls during their marriage.
If you want to protect assets to ensure your financial stability in case things don't work out, wish to try to avoid a stressful, lengthy and costly legal battle about who gets what, or ensure the financial stability of any children you may have from a first marriage then a nuptial agreement could be right for you.

Are nuptial agreements legally binding?
In England and Wales, nuptial agreements are not legally binding if one spouse wants to try to argue that they should not be bound by its terms. Ultimately, it is the family court that will have the last word when deciding how assets and income ought to be divided on divorce. In the case of Radmacher v Granatino, a case that is now 15 years old, the Supreme Court indicated to judges sitting in the family courts that they "should give effect to a nuptial agreement that is freely entered into by each party with a full appreciation of its implications unless in the circumstances prevailing, it would not be fair to hold the parties to their agreement."

Since Radmacher, there have been a number of cases that have been dealt with in the High Court looking at how the agreement was entered into and in particular whether the following safeguards have been met when creating a nuptial agreement. If so, it is more likely to be upheld by judges sitting in the family court and the parties should expect to be held to the terms of any nuptial agreement entered into. The safeguards are:
· Both parties have had separate and independent legal advice.
· Both parties have disclosed their financial positions.
· Both parties have negotiated the terms of the agreement well before the date of marriage (a minimum of 28 days but ideally much longer). This is to avoid undue pressure – "sign this or the wedding is off...".
· Both parties have agreed to review the terms in the future, as circumstances change such as the birth of a child.

In the case of Entwistle v Helliwell, the husband appealed a final order which required Ms Helliwell to pay him a lump sum of £400,000. The husband had originally been seeking £2.5m and the wife at one stage had offered him £800k. The parties were married for three years and did not have any children. They had signed a prenuptial agreement on the day of the wedding, drafted on the basis that each party keep their own separate assets, they would not make any financial claims against the other and any property occupied as a family home would be divided between them in the shares reflecting their contribution.

On appeal by the husband, the Court of Appeal determined that the prenuptial agreement was weakened by the wife's deliberate non-disclosure as she had not disclosed her business assets. The matter has been remitted to the High Court. This case serves as a stark reminder that even with the recognition of autonomy, the court will take a firm stance against those who do not provide full and accurate disclosure.

Based on my own experiences in family law, nuptial agreements are complex and intricate documents, requiring considerable thought and attention to detail. For example, if gifts are received from parents on marriage or from family members trying to avoid inheritance tax, or there are assets located in other jurisdictions, these issues need to be considered carefully. Whether you love or hate the idea of nuptial agreements, they are a very much an accepted wealth management tool. It is important that couples think about what they want to happen in the event they don't get their happy ever after. After all, is it not better to talk about the "worst case scenario" at a time when you are most in love, not later when there may be bitterness and arguments?

For more information, please visit: sasdaniels.co.uk