What is a postnup agreement – and could it be right for you?

Postnuptial agreements are increasingly being signed by younger couples looking to safeguard money given to them by their parents, as the Bank of Mum and Dad hands down record sums.

Signing a postnup is viewed by many younger couples in the same practical light as writing a will, at a time when both partners in more marriages tend to be financially independent.

Emma Harte, family partner at Keystone Law, said the UK has moved towards greater legal recognition of prenups and postnups.

“When I first qualified, prenups and postnups weren’t that common, but over the years, they have become more prevalent. I’ve always got some on the go at any one time,” Harte said.

The ultimate goal of these agreements is to provide clarity and prevent protracted legal battles, even though they are intended to make separations more amicable and less expensive.

“I think most people who sign a postnup feel that if the marriage does fail, then at least they don’t have to argue over what’s going to happen because they’ve already had that conversation,” Harte said.

“It should mean that there’s less likelihood of somebody haring off to court and having horrendously expensive proceedings.”

Here’s everything you need to know about how postnups work.

What is the purpose of a postnup?

“The purpose of a postnup is to try to ensure that when you’ve already got married, should a divorce or a separation subsequently occur, you’ve agreed what’s going to happen, which should in theory then mean there’s no extra costs or arguing about finances,” explained Harte.

There are several reasons for postnups, the lawyer said.

“Some can happen once a marriage has broken down. I commonly tend to get these requests if perhaps somebody’s gone off and had an affair, then the two have decided to try and make another go of it. Then, for example, the person who didn’t leave the partnership, says, ‘I’m willing to give it another go, but we need to sort things out financially so if we can’t get the marriage to work, then we’ve got the finances sorted’,” Harte said.

“Some couples have a postnup agreement early on in the marriage if they didn’t get round to doing a prenup, and there are others who have a prenup and a postnup as a sort of belt and braces.”

Why are they important?

Postnups are designed to protect family wealth, second marriages, or assets brought into the union from prior business ventures, Harte said.

They can also address new financial changes, such as an inheritance or a significant increase in wealth.

“It might be that during the marriage somebody has inherited quite a lot of money, or becomes the beneficiary of trust or family business, and the couple have a conversation and decide this money is going to be kept out of the equation. And if anything goes wrong going forward, this shows that they are in agreement about it,” Harte said.

“Another example is perhaps it’s their second marriage and they want to protect the settlement that was given from their first marriage to their children, or they want to protect what they brought to the marriage. Perhaps it was a business that they’d set up and maybe sold prior to the second marriage.

“It’s also become more common now where the Bank of Mum and Dad have given money and they’re concerned as to what’s going to happen if the couple divorce at a later stage. Perhaps one set of parents has helped out because the couple has got into financial difficulties, and they want to know their contribution is protected.”

How are postnups different to a prenup?

“This is just a matter of timing,” Harte explained.

“You enter into a prenup before the marriage, and a postnup is entered into after the marriage has taken place.”

What should the agreement cover?

“Tailoring postnup agreements is complex because they are not simple templates and must be adapted to each specific couple’s circumstances,” Harte said.

“But generally speaking, a postnup makes sure that there’s sufficient housing and income provisions made for both partners and any children. Then there are specific costs such as childcare and school fees.

“Couples also usually agree on what’s going to happen to joint or sole assets like cars, furniture, paintings, holiday homes – and of course pets! In addition, they will agree what should happen to any further inheritances that either party might get during the course of the marriage.

“Agreements should ideally account for various life changes, such as the birth of children or career shifts. If a couple moves abroad, the agreement may need to be reviewed by foreign lawyers to ensure it remains valid.”

Are they legally binding?

Postnups are not automatically legally binding, but Harte says courts now increasingly take them into account.

“They are now looked at as more enforceable by the courts,” says the lawyer. “If somebody has entered into a prenup or postnup, a judge will have a look at it and say, ‘Well, I can see that this postnup was entered into properly, because both had independent legal advice and you both provided full details of your financial positions. Nobody was pressured into doing it or was given a time limit to sign it. So, yes I’m going to take this into account as one of the factors in this case bearing in mind all the factors set out in Section 25 of the Matrimonial Causes Act’.”

An effective postnup must, however, avoid being entirely one-sided, she highlights.

“An agreement cannot completely exclude a spouse from all assets, as courts may override provisions deemed unfair to ensure the needs of a spouse or children are met,” she explained.

“You have to get the balance right because there’s no point in saying, ‘Everything that I’m bringing to the marriage is mine,’ because under law, property and assets that are built up through an actual marriage can be shared.

“A postnup is to protect the family wealth, but equally they must be sufficiently fair so that they don’t get pulled to pieces in any subsequent divorce.”

From whom should couples seek advice?

Before instructing solicitors to draft any formal documents, couples can use a mediator to help them reach amicable terms.

“Married couples want to keep discussions amicable, and because very often these agreements involve families, they can be quite sensitive, so it may be useful to try and talk it through with a mediator first before a solicitor,” Harte said.

The mediator must be impartial and not act for either party.

They can talk through the various issues that ought to be thought about in order to help the couple come to terms that seem fair.

“Once the couple have found a way forward which sufficiently protects all parties, they can get a family solicitor or family law specialist to draw it up,” Harte said.