People’s financial situations will change throughout their lives and setting out their expectations in the event of a divorce can be a fundamental aspect of the wealth management process for soon-to-be and already married couples.
Pre-nuptial agreements have become incredibly popular and are being treated as an ‘insurance tool’ in the event a marriage was to crumble away.
A similar arrangement is now available to married couples as well – the post-nuptial agreement.
But can it be as effective as a pre-nup when it comes to financial planning?
International Adviser reached out to tax and wealth planning professionals to find out.
To enter or not to enter?
“With pre-nuptial agreements becoming increasingly popular for couples in the UK, it is no surprise in recent times that married couples are looking to implement something similar in the form of a post-nuptial agreement,” said Andrew Dixon, head of UK & international wealth planning at Kleinwort Hambros.
“Often, the decision [to enter into a post-nup] can be prompted when the couple has children or experiences a sudden change in their financial circumstances, such as receiving a large inheritance, for example,” he added.
Carmel Brown, family law senior associate at Irwin Mitchell, agrees.
“Post-nups are designed to protect one party’s (or both parties) wealth, in the same way that a pre-nup would,” she said.
“Post-nups are a great wealth management tool and arise in various circumstances. They offer a bespoke solution to protect wealth, which can be used alongside other tax and estate planning tools.”
Beware of the law
But, just like pre-nups, post-nups are not legally binding under UK law, warned David Denton, international tax expert at Quilter International.
“If the agreement is deemed fair, for example it doesn’t deprive a dependent, it may be accepted by the courts.
“Wealthy individuals moving to the UK may want formal marital agreements with their spouses before moving here, given the default position from the courts in the UK is a 50/50 split,” he said.
Kleinwort’s Dixon added that although they are not legally binding, such arrangement can carry weight in the British courts and “can be an important planning tool”.
Treat it like any other planning tool
So, why should married couples think of getting a post-nup?
“The post-nup records intentions and expectations and allows parties to define how they want their wealth to be treated,” Brown said.
And like estate planning, being ready in the event of a divorce is just as important, Dixon added.
“Clients give a lot of time and thought to their Will, which looks at how their assets will be distributed upon their death, but do not give the same consideration to what the financial implications would be if they were to get divorced.
“Although it may be uncomfortable to discuss such a scenario, there is no arguing that it’s an important conversation to have with clients, and a post-nuptial agreement can be a powerful part of that,” he added.
