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Pre and postnuptial agreements: are they legally binding?

Gateley Legal

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In this episode host, Catriona Attride is joined by Vanessa Gardiner, a director in our family team. Together they look at the advantages and disadvantages of pre and postnuptial agreements and explore whether or not you need one.

In this episode:

  • We define pre and postnuptial agreements. 
  • We look at whether pre/postnuptial agreements are legally binding in the UK.
  • We outline the advantages/disadvantages of pre/postnuptial agreements.
  • We explore why couples may want to enter a pre/postnuptial agreement.
  • We outline which key assets should be included in a pre/postnuptial agreement.
  • We explore pre/postnuptial case law.

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This episode is part of our Talking Family and Wealth podcast series. Learn more about the series and what we cover. This podcast is available on iTunes, Spotify and Soundcloud.

Read the transcript:

Catriona Attride: Welcome to Talking Family and Wealth, your straight-talking guide to dealing with matters that are at the heart of the family in terms of planning for the future and protecting assets and resolving difficulties that might arise in family relationships. My name is Catriona Attride and I am a private client lawyer with over 20 years experience supporting clients in their estate and tax planning.

In each episode, I'll be joined by an expert and together we'll lift the lid on how best to handle everything from inheritance to divorce. Along the way, we'll share some of the situations we've encountered. Some good, some bad, and many ugly, but all useful in helping you to protect your family and wealth.

Hello and welcome to another edition of our Talking Family and Wealth session. Today I'm joined by Vanessa Gardiner, who's a legal director in our family team. Hi, Vanessa. How are you?

Vanessa Gardiner: Hi, Cat. I'm good, thank you.

Catriona Attride: Good. So today we're going to look at the interesting subject of pre and postnuptial agreements, which I think a lot of people will have heard of, not least, if they read any sort of gossip columns or familiar with the rich and famous in America. Where you've got the likes of Jay Z and Beyonce, where allegedly, she gets five million per child according to the prenup. But I think there's a lot of uncertainty about whether or not you need one, who needs one, are they just for the rich and famous, and actually whether or not they are legally binding in this country. So, hopefully, Vanessa, you're going to clear up some of the uncertainty for us today.

Vanessa Gardiner: I shall do my best.

Catriona Attride: Good. So if we start at the basics, can you just tell us a little bit about what are pre and postnuptial agreements?

Vanessa Gardiner: Okay. So, these are legal documents, which a solicitor will prepare for you, either in advance of your marriage ceremony, i.e. a prenuptial agreement, or after your marriage ceremony taking place, so a postnuptial agreement. And they will set out, in a lot of detail, how the assets and the income of the couple basically should be divided should they later go on to get divorced and need to come to a financial agreement. So the concept of pre and postnuptial agreements are very straightforward. It becomes slightly more complicated by the fact that we here in England and Wales have this very discretionary, quite subjective family justice system.

Catriona Attride: Which makes it sound quite complicated. What is it that makes our family justice system so complicated?

Vanessa Gardiner: So, in England and Wales, we have laws set out in statute, which are basically laws made by the government. And then we have judicial guidance, which is made by higher courts of justice who make decisions about cases. Those are recorded and they create case law, which lower courts will then follow. And our judges are very adept at creating what we call case law, where they see gaps in the law which the government hasn't quite caught up with dealing with in statute yet. So-

Catriona Attride: So they're filling in the gaps.

Vanessa Gardiner: Absolutely. They're basically ruling on cases every day. You've got judges on the front line, they are seeing the social and economic changes of how the society is evolving, and they can see where the gaps are that are basically not covered by the current law, that the government has in place. You've got the law and society, and they're just not in sync with each other, basically.

Catriona Attride: So I suppose society's outpacing the lawmakers.

Vanessa Gardiner: Yeah, absolutely, 100%. The law is definitely not up to date with what our current society looks like, and what the needs are of the people in everyday society, basically. So what we have is case law that surrounds pre and postnuptial agreements, and this has been developed by the courts and this is basically the courts taking control and saying, "Well, the government haven't caught up with this yet, so we're going to step in..." Obviously, they'll deny this completely. "... And then we're going to step in and make some judicial guidance which everybody actually has to follow and we in the courts are going to enforce it as well."

Catriona Attride: Because am I right in thinking that historically prenups were seen as against public policy?

Vanessa Gardiner: Yeah, pretty much. Because you can't ask the jurisdiction of the court to make a determination in regards to financial settlements in divorce proceedings, because anyone can always make an application to the court, and it was felt like it did go against public policy, that you were trying to limit the court's jurisdiction. But actually, even the courts have caught up with that and are going, "Well actually, why shouldn't people be more autonomous? Why shouldn't they be allowed to have more control over their own financial arrangements, as long as certain criteria are met?" And that public policy has actually changed in our believing... Well, as far as the courts are concerned, that it is actually in the public's interest to be able to be more in control of their financial arrangements in a divorce.

Catriona Attride: So it's quite actually reassuring to hear that the courts are keeping pace with society really, isn't it?

Vanessa Gardiner: Yeah, it really is. I think the government will find themselves under pressure. I mean, they already are, but I think they'll find themselves under increasing pressure to catch up with it and actually make some statutory changes.

Catriona Attride: So why would a couple decide to enter into either a pre or postnuptial agreement?

Vanessa Gardiner: Basically, some of the reasons we were just saying. It enables the couple to take control of their own financial future and to establish, with as far as is possible, a certain amount of certainty about what a potential divorce settlement will look like. And that in itself will kind of help with scope if you go into divorce proceedings, what you can expect, what your costs might be. It kind of helps to maybe limit the extensiveness of maybe your actual solicitor's involvement down the line.

Catriona Attride: So there is an advantage then to thinking about divorce before you're even thinking about divorce?

Vanessa Gardiner: There is. There's an uncomfortable advantage-

Catriona Attride: Yeah.

Vanessa Gardiner: ... to thinking about it, basically. But it is something that more people are doing, and we do recommend that people carry on doing.

Catriona Attride: Okay, so can you give us an idea on what the advantages are?

Vanessa Gardiner: So, basically, yes. So you can use a prenuptial agreement to autonomously determine what your financial outcome might be in the divorce. You can agree in advance what you both accept will be matrimonial property, and that's the term we use when we deal with these sorts of agreements, i.e., what do they both accept should be divided equally between them, or perhaps in unequal divisions, but which they both accept they should both receive a benefit from.

Or you could agree in advance... For example, if you've got businesses or portfolio investments, or maybe these have been acquired pre-marriage, these could be agreed that they'll be non-matrimonial assets. They're going to be separated property and they're going to be ring-fenced and put to the side and they're not going to be brought into a divorce.

You can even talk about re-housing expectations, which actually we do more and more now. Based on what you have right now, if you separated, what are both of your expectations about the sort of house, the value you're going to live in, what level of spousal maintenance you could expect to receive. So you can go into that level of detail and that does create an advantage. You're trying to minimize the issues later down the line.

Catriona Attride: So how do you work it out what you might be looking at covering or putting in it?

Vanessa Gardiner: So, working out what you might need in a prenuptial agreement is basically we approach it in the same way as we would if we were dealing with a financial agreement in divorce proceedings. We're going to recommend there be financial disclosure. We're going to then look at the disclosure from both parties in the couple and we're going to advise them on... If you were getting divorced today, this is what we would recommend a settlement would look like. There's a lot of communication, and we'll also talk to our client about what are your expectations? What do you think would be fair? And then we try and bring in their own ideas and thoughts and discussions they've had between them into that prenuptial agreement, or postnuptial agreement as well.

Catriona Attride: So this is very much a bespoke service, isn't it? This isn't a one size fits all approach.

Vanessa Gardiner: No, not at all. It is very much, just as in within divorce proceedings, every case turns on its own facts. And we always say to clients, when we advise on a settlement, there's no real science here. It's very much an art form. We're taking your family circumstances and we're applying the statutory law to it. Section 25 of the Matrimonial Causes Act sets out a number of basic points that we have to take into account, and we're also applying case law to it as well, basically. So there's a lot to go through and a lot to advise the clients on, and it is a case of working through what really is best for this couple and this situation, and then a blank piece of paper, writing from scratch.

Catriona Attride: And so tell me a little bit about the case law that's around. What sort of things have cases before courts actually been asked to consider and made decisions on in relation to these agreements?

Vanessa Gardiner: So, the biggest case, which may or may not be... Is very well known to us, family lawyers. It was a big decision that came down from the Supreme Court and it was Radmacher and Granatino, in 2010. And the impact of that case was that it created an assumption, a presumption, in fact, a presumption that the court will uphold the terms of pre and postnuptial agreements, as long as it meets the needs of all parties and children of the family. There have been quite a few cases since then that have slightly developed it more, but this was the big one that really changed the way we now approach prenuptial agreements. The existence of a prenuptial agreement or postnup is a circumstance of the case that the court has to take into account, but they have to look at... As well as, there is this agreement. Does it still meet the needs of the parties and have the parties complied with the criteria that the court set down in Radmacher and Granatino? They set down some very specific guidance, which if you follow, then it should provide you with a strong prenuptial agreement that you would expect to then be upheld.

But importantly, very importantly, and what's interest most people, especially if they're high net worth individuals, is having these types of agreements in place, prepared properly, reduces what claims, but limits the claims that the other spouse can make from rather sharing in the wealth, everything's in the pot and I'm going to share in the overall benefit, to reducing it to a claim for needs only. And that is the big concept behind prenuptial agreements. What you need and sharing in the overall wealth can be two extremely different things, and for someone who's got a lot of wealth pre-acquired, they're going to probably want to hold onto that as much as possible. And this case law is effectively put in place this presumption that that is what should happen. And needs will be met, but not necessarily anything over and above that, except as provided for in the prenuptial agreement.

Catriona Attride: So I suppose there is definitely an advantage and an appeal to almost coming to a financial agreement when you still like each other, i.e. at the beginning of the marriage, then when you potentially have all fallen out later and it's all gone wrong.

Vanessa Gardiner: Yes, absolutely. And we do say that to people. For some people, it is an uncomfortable conversation. For other people, actually, they approach it in a very businesslike manner. But yeah, approaching something when you do both still like each other, and when you're actually feeling positive and you've just got married or you're getting married, it is a good thing because you have a lot of goodwill there, and the goodwill is what you lose when you go through the divorce and the trust. So, what people are willing to agree to when they are in the getting married phase is usually quite different. But actually, probably is the right is the decision.

So it's important to be doing it in the right mindset. And I have had people actually say to me after I've given them the advice and they are perhaps what we might call the slightly more disadvantaged, the other person has the money, they've actually said, "No. I'm not going to sign that." And one or two have gone away and had to have some conversations about whether they're getting married or not.

Catriona Attride: Yeah.

Vanessa Gardiner: It is a bit awkward, but also wouldn't you rather know going in that these are what your expectations are?

Catriona Attride: Absolutely and I know when I talk to clients on the private client side, when, for example, they're passing wealth down to their children, but they're concerned about when their children get married and they want them to do prenups. And as I always say, if you've got nothing to hide and you're coming into this from the right place, why would you object to signing a prenup? It's not suggesting that there is any doubt over the relationship. Moreover, what you're saying is, look, this is what we've come with, and therefore this is what we want to protect. So yeah, for me, I just think why would it be an issue? But I do realize that some people do take it a little bit more personal.

Vanessa Gardiner: Yeah. Yeah, but that's exactly right, and you picked up on the point about intergenerational wealth, which is really interesting. I have been approached, normally by fathers, who are planning on making some early inheritance gifts to their children, particularly daughters, and they have actually come to me and said, "Right, I want her to have a prenuptial agreement. She's looking at getting married in the foreseeable. I want to protect the wealth I'm passing down to her. I don't want this person to have a share of it. This is my hard graft and I want it to go to my daughter and I don't want it to get sucked into a divorce." And that's happening more and more, and I think that's great because it's actually part of their own inheritance tax planning, and why shouldn't they want to protect their wealth? Not everybody necessarily wants to be pushed into a prenuptial agreement by their father, but actually, it is a good means of protection, and actually, it's now part of a more holistic approach that we can take... All being in the same firm, there's that ability to provide that overall advice to the entire family, especially if you're doing that inheritance tax planning.

Catriona Attride: Yeah, absolutely. Because the conversations we have with clients sometimes is the balance between saving 40% in inheritance tax, by perhaps, reducing their estate by gifting, or the risk of losing 50% on a divorce. And actually-

Vanessa Gardiner: Yes.

Catriona Attride: Sometimes it is the fact that they would rather HMRC had the money than the toads, ex-partners, as they often are. So it's definitely a big thing, isn't it? So what are the other benefits of having the pre and postnuptial agreement prepared?

Vanessa Gardiner: So if you think about the type of person who might need an agreement, we've got... Something I also see quite a lot is second marriages, and this also makes a lot of sense. You've been married, you've had children, you came out of that with a divorce settlement, and you've met somebody else. And actually, you would like to... Normally what we hear is we want to protect that wealth for the children of our first marriage. And sometimes it's less about the other person. They have enough to live on together, that other person may have some of their own wealth, but actually, I want to protect the money that my husband and I, or my wife and I had from that previous marriage. And actually doing prenuptial agreements, and then following that up with a will that reflects the terms of the prenuptial agreement, enable, again, that family planning. And this is something I do see quite a lot as well from normal people. You don't have to be big, high net worth, big business to want to protect what you have for your children if you're getting into a second marriage.

Catriona Attride: Yeah, it's not unreasonable, is it?

Vanessa Gardiner: No, not at all. But you can look at the other end of the spectrum, and then you have got your high net worth... We've done prenuptial agreements for professional footballers, young bankers, people who have... Especially footballers, the longevity of their careers, they've amassed a fortune extremely quickly.

Catriona Attride: Yeah.

Vanessa Gardiner: They usually seem to like get married quite young-

Catriona Attride: Yeah.

Vanessa Gardiner: ... as well, and actually, yeah, you need prenuptial agreements. And quite often with them, there might be cross-jurisdictional issues where they're nationals of a different country, but they're actually playing here for a team. And then, therefore, we've got the foreign element and the jurisdictional elements that need thinking about as well. But actually, quite often, their careers can be quite short and they want to make sure that they've got provision for themselves for when that career ends, and they're not sure what they're going to do after that.

Catriona Attride: Yeah, earning potential's not there. So in terms of the sort of re-housing expectations, because I think this is one of the areas where you do have to make sure that the housing needs of both parties are met adequately, don't you? So that's the bit where you haven't got quite as much flexibility.

Vanessa Gardiner: Yes, that's right. So we do have to think quite strongly about what are the needs of the parties. And I keep coming back to this term needs, and the case law says there are needs, there's sharing, and there's compensation, basically. And needs are your basic housing needs, your living expenses, your retirement needs, and how can they be met. And this is an exercise of what is your... Or actually, it goes back to the statute, as well, which I'll take you just briefly back to Section 25, Matrimonial Causes Act. We have to take these factors into account as solicitors when we advise you and the courts would do the same.

And a very brief, give you an idea... We have to look at financial resources and that comes through the financial disclosure. What have you got and how much is it worth? What's your standard of living, at this point in time, at the time of the marriage? What value of the house are you living in? What kind of incomes have you got? What is your spending like? We look at the ages. Do we need to think about retirement planning? Where are you in your life? Are they still quite young? Is it a long marriage? A short marriage? Disabilities, especially with children. I do have clients with children who have disabilities and you have to think a bit more outside the box about what those children's needs are going to be as well and for how long and will they be independent.

So these are all the things we have to think about and that leads straight into housing. What sort of house are you in now? Because if this is your standard of living now, your expectation is that if the assets you have support it, why would you agree to live in a lesser standard of living, unless you don't have enough money to buy a similar type of house? Bearing in mind you both are going to go from one house to two houses.

Catriona Attride: Absolutely. Yeah. It's a lot to think about, isn't it? So, what sort of person might look to do an agreement then? And I think you've touched on the fact that you've got the footballers and everyone else, but actually there are those that aren't quite at that level but this would still be appropriate for.

Vanessa Gardiner: Yeah, absolutely. Really anyone who is coming to a relationship. You might be someone who's in your late 30s or 40s, and you've got a house, and you've got money in savings in the bank that you've accrued prior to the marriage, and maybe you're moving in with somebody or you're getting married to somebody who actually not really has anything. Doesn't own a property, doesn't have any money in the bank. And in fact, I did give advice to somebody exactly like that. She'd bought a house when she was young, she'd worked really hard, she had money in the bank, she had a thriving business that was her own, and she has done incredibly well. And she met a chap who was a personal trainer, had a cash business, had nothing else, was previously divorced with children, and I said to her, "You really need a prenuptial agreement here."

And really didn't want to do it, really [inaudible 00:21:37]. We actually ended up doing a deed of trust in relation to a property instead to give her some protection, and a year later they got divorced.

Catriona Attride: Right. Okay.

Vanessa Gardiner: And luckily she had a deed of trust. But a prenuptial agreement would have been a lot clearer.

Catriona Attride: Yeah.

Vanessa Gardiner: Because actually she had a mortgage-free property and had she not had at least that deed of trust... The prenuptial agreement has been better. She did have to give him some money to go away, basically, but a prenuptial agreement would have avoided that.

Catriona Attride: Yeah, called hindsight. It's a wonderful thing, isn't it? Can you ever change an agreement once it's been signed by the couple?

Vanessa Gardiner: Yes. So that's the good thing about these types of agreements, is they should always be reviewed-

Catriona Attride: Okay.

Vanessa Gardiner: ... After they have been signed. And you can vary an agreement by consent, basically. So we will always advise clients to include trigger events within the terms of the agreement, that basically will say, "At this point in time, you should review this agreement, preferably with legal advice." And that way, you enable the document...It's current and you review it, and it's still strong and valid, and therefore gives it a stronger enforceability in later divorce proceedings.

Catriona Attride: So can you give us some example of what those trigger events might be?

Vanessa Gardiner: Yeah, absolutely. So, you would most certainly want to at least review a pre or postnuptial agreement if there have been substantive changes to your financial circumstances. And that could include massive, massive job promotion and a massive hike in income or win the lottery. We did a divorce for a lottery client who really wished he had done a prenuptial agreement.

Catriona Attride: Yeah, I bet.

Vanessa Gardiner: Also businesses, interestingly. If you have your own business, and that business suddenly increases in value or you float it. Wow, you're suddenly going to massively increase your wealth. And if you've made... And again, there's case law around this... An exceptional contribution towards that asset, then again, there's reason to look at how much of that asset should be shared and how much of it should be ring-fenced for you, and you're able to do that in advance. So if you know there's going to be substantive financial changes that are different to when the agreement was drawn up, you really, really need to review it and come back to your solicitor and say, "Right, this is happening," or, "This has happened," and then it needs to be updated. And usually in that sort of situation means there's going to be some increase in entitlement to the other person in some way and doesn't necessarily be substantial, or you're going to redraft it in a way to protect a new asset that's come into the equation or an inheritance that you're anticipating getting. That I've done a few times. Actually, clients have come, and very, very normal people have come along gone, "I know I'm going to get an early inheritance, and it's going to be several 100,000 pounds." Well, for a normal person on the street, that can change your life. And certainly, you would want to think about whether you want to protect that.

Catriona Attride: Yeah.

Vanessa Gardiner: That's really important.

Catriona Attride: So, would another trigger event be the birth of a child?

Vanessa Gardiner: Absolutely. Children change everything in every way, always, and prenuptial agreements are exactly the same. When a child enters a family, the needs of that child become a priority by the courts. And you have to ensure that the needs of that child, and the primary carer of that child. So if one of you basically looks after that child more than the other, because one person is working or one person's at home or part-time, the needs of the person who is the primary carer for that child have got to be thought about and probably increased. If you've had housing thought about, "Well if we separate now, we'd have a one-bedroom house." Well, suddenly you have a child, well now they need a two-bedroom house, you both need a two-bedroom house, a three-bedroom house. So it's really important, particularly because if you do not review your agreement after a substantial financial change or the birth of one or more child or even adoption... If you bring a child into your household and become the carer for that child, these are reasons why you can find a prenuptial agreement may not be as effective in a divorce, if you haven't reviewed it on these trigger events.

Catriona Attride: Okay, that's good to know and, I think, quite important. And that would all be done in a postnup, wouldn't it? Because that's the difference. The prenup is before the marriage and the postnup is done after. And am I right in thinking that we would always recommend that where you've done a prenup quite soon after the marriage, you would sort of ratifying it with a postnup?

Vanessa Gardiner: It does depend. Generally, that is the right advice. It kind of depends how soon before the marriage-

Catriona Attride: Okay.

Vanessa Gardiner: ... You decided to enter into your prenuptial agreement.

Catriona Attride: So the closer you are to the marriage, the more important it is to do the postnup.

Vanessa Gardiner: Yes, it's the belts and braces.

Catriona Attride: Yeah.

Vanessa Gardiner: There is a recommendation that prenuptial agreements... They should be entered into a reasonable period before the marriage, with financial disclosure, with an opportunity to take legal advice, and that it's been entered into freely. And a recommendation by the law commission is that that is at least 21 days. I think if you spoke to any family solicitor, if you came to them, like people quite often do, going, "I'm getting married in three weeks," you kind of start sweating a little bit and go, "Right, that's an awful lot of work to do in a three week period."

Catriona Attride: Yeah.

Vanessa Gardiner: And if it's complex... The disclosure process itself could take months if you're dealing with extremely high net worth people, or you're professional footballers and there's all sorts of sponsorship, money coming in from different sources, properties, investments. Or in a complex business structure, you cannot turn that around.

Catriona Attride: Yeah, you're not doing that in three weeks.

Vanessa Gardiner: No. We're not doing that in three weeks. Most definitely. Either you're going to delay your wedding, or you're going to do a postnuptial agreement. But for some people, they will come to us and actually, it is quite straightforward and we can turn it around in a three to four week period. But I would always prefer, in that situation, I'm going to say to them, "Let's do a postnuptial agreement in the same terms, right after. Let's say within a month after the wedding, we're going to do that." And then everybody feels comfortable that they still agree. With what they entered into before, they still agree with afterwards. It's just that, again, everything we do is about making that agreement as solid and enforceable later down the line, if you potentially need to rely on it. And taking the time and the money to do it now, it's an investment.

Catriona Attride: So ultimately what we're saying is, is that the time spent now doing these documents is ultimately a great investment for the future, because if you put the effort in now, then you're going to have far less issue with it later when you come to rely on it.

Vanessa Gardiner: Absolutely. It really is. And if you think about in divorce proceedings, not only can you... It happens all the time. Clients can be arguing over things that they wouldn't necessarily have argued over if they separated on better terms. And you can spend tens of thousands of pounds. You can spend hundreds of thousands of pounds. Some people do. Sometimes they're arguing over principles more than the assets themselves. And actually spending money now, upfront, to have an agreement that you know is there, that everybody is aware of, everyone knows what the intentions are and you've entered into the marriage freely knowing that I think that makes a big difference.

It might change the decisions you make during the marriage about how you spend your money or what you want the other person to spend their money on, but it certainly means that you know that the outcome is going to be in the region of, if not exactly, what you agreed to at the time you entered into the prenup. And actually, the case law says that if you enter into any form of legal agreement within a marriage, prenups, postnups, you should expect to be held to the terms of that agreement. You enter into it expecting to get no more than what you agreed to. And it isn't a good enough argument to say, "Well, I just signed it. I figured I'd argue it later down the line." Nope. That is just not going to work for you.

Catriona Attride: And both parties have got to be properly represented.

Vanessa Gardiner: In an ideal world. Sometimes you will get someone who comes to you and they will pay for it and they want to draft it up, and the other person isn't going to get legal advice. And it's not a bar, it's not a reason not to do it, but it is important that one, you tell the other person, they can get legal advice, that they should get legal advice. But if they are an intelligent person, especially people who are involved in their own businesses or they're professional people, the court will apply a certain assumption of intelligence and understanding of the legal process to them.

So again, it's recommended that you take legal advice. If they don't, it just means that they're going to have an extremely good explanation as to why they don't think they should be held to it. And ignorance of or unwillingness to take legal advice, again, it just doesn't really get you anywhere in the courts anymore.

Catriona Attride: No. And so, you talked about the decision in Radmacher and Granatino and how that sort of set the scene, if you like, for the enforceability of prenups. And how do the courts actually approach them in proceedings when they come across them?

Vanessa Gardiner: So, basically, if you're going through solicitors or even in the courts, it has to be disclosed if there has been a prenuptial agreement, and obviously, the person who wanted it drawn up for their benefit is going to be waving it frantically going, "I've got this prenuptial agreement I paid for," and quite rightly they did. And the court has to review it, and they have to look at the terms of it, and if they apply the terms of that prenuptial agreement to the assets in this case, what would the outcome be? Well, the court's approach can be, "I will uphold all of the terms, some of the terms, or none of the terms." And there's case law for all of those situations. But normally, as long as needs are being met, as long as housing, living expenses, and it's close to the standard of living that you were currently enjoying during the marriage, as far as the assets will allow, then you should be expected to be held to it. Unless you can prove fraud, misrepresentation or duress.

And all of those lead to satellite litigation. You have to actually litigate the prenuptial agreement beforehand, but you would be saying, "It was completely misrepresented. Or he didn't disclose everything. He told me the business was worth this, but actually, I didn't realize that there'd been a cash injection into it and it's now worth 2 million pounds." There are reasons why you might try to go behind a prenuptial agreement, but essentially, the court will say, "These are what the terms are. Unless anyone is arguing this agreement should not actually be upheld in any way, i.e. fraud, misrepresentation or duress, then I'm going to look at it and apply it."

And the only case laws that I've come across where it hasn't been applied is where it was actually prepared in a foreign jurisdiction abroad and it literally left the wife with nothing. Well, in fact it left her with debts.

Catriona Attride: Oh, with debts. Okay.

Vanessa Gardiner: It left her with less than nothing. And she was the primary carer for the children. And this was, I think, in fact a foreign divorce and the wife had been able to bring proceedings here in the UK and there's very specific requirements you have to meet. But the court basically said, "No way. I am not holding her to this agreement. She will be destitute with these children." And they made a more generous award to her than she would have got had she pursued it in the other jurisdiction.

Catriona Attride: Yeah, I suppose that's reassuring.

Vanessa Gardiner: Yes.

Catriona Attride: I suppose the idea of doing the prenup or postnup is so that you don't end up in court. So we talked a lot about sort of the core process, but the aim would be, I suppose, that if you've got a prenup, the point is you've already agreed it, so I'm sure more settlements probably happen that we obviously don't hear about because they don't go to court. Because actually the postnups worked, and it's doing what it's supposed to do. Have you actually settled a divorce with a prenup when it hasn't had to go in front of a court?

Vanessa Gardiner: Absolutely. And that is exactly right. The purpose of it is to try to avoid ending up in any form of litigation. And I would probably say in the last five years, when a client has come to me and said, "Actually, there is a prenuptial agreement. This is what the terms of it are," we've settled, either on those terms or very close to, and usually the variation comes in the form of maintenance. Most of the capital in the-

Catriona Attride: Right.

Vanessa Gardiner: ... pension side of things tend to stick to what was agreed, but actually, it tends to be the maintenance. And usually, again, the maintenance tends to be varied upwards from what was agreed in the prenuptial agreement or the postnup, because of children.

Catriona Attride: Yeah.

Vanessa Gardiner: And maybe they're now at private school or they have extra requirements. But generally, children have led to an increase in the spousal maintenance. But all the cases I've probably done the last five years with a prenuptial agreement have actually settled reasonably amicably with a bit of negotiation, but ultimately have avoided what could have been really expensive court proceedings.

Catriona Attride: Yeah, absolutely. So are there any downsides to entering into a pre or postnup?

Vanessa Gardiner: Not really, if I'm perfectly honest. The only downside is if you're the person who's being asked to sign it because you are effectively signing away your right to ask for more than your needs in a divorce. So if you're on the other side of it, the person who's not trying to protect their assets, your claims for financial relief are effectively being limited, so you do have to seriously think about whether you want to enter into it. But if you're doing it with legal advice...

Catriona Attride: Yeah.

Vanessa Gardiner: You should also be coming at it knowing you've got that security. So it is security for both people. That one's not walking away with anything and the other is protecting their assets. You do have to understand that, as we've just said, just because you have a prenuptial agreement, it doesn't mean that you cannot make an application to the court. You can never... Until the government catch up and decide to make these agreements legally binding, automatically contractual documents, the jurisdiction of the court is always there, that an application can be made and the agreement just becomes part of the proceedings. Again, it will probably help matters immensely, but you cannot avoid somebody litigating if they want to do it. If somebody wants to litigate, they're going to find a way to litigate. And actually, as I said before, the fact that a prenuptial agreement exists, it can still potentially mean there can be some form of litigation over the nature of an asset, something that was non-matrimonial. An investment property that was ring-fenced because it was bought prior to the marriage, but actually during the marriage, they've moved into it and turned it into the family home, which automatically turns it into a matrimonial asset.

Vanessa Gardiner: And obviously, who would know that, unless you're a lawyer? So you have these potential changes in an asset from non-matrimonial to matrimonial to potentially is the maintenance enough? Or even, potentially, whether you're arguing over the validity of the agreement, but that is very rare and the threshold is very high. And I would not advise somebody to enter into litigation over whether or not the prenuptial agreement is a valid legal document unless I was really confident that that case... Because you're talking about tens of thousands of pounds alone to argue this out-

Catriona Attride: At some point, yeah.

Vanessa Gardiner: ... Before you even get into substantive negotiations, or litigation, on how you're going to divide up the assets. So, I suppose the downside is it doesn't prevent litigation taking place. But there are far more benefits to doing it, and I would always recommend doing it over not doing it. And actually, potentially, the government may make these retrospectively legally binding.

Catriona Attride: Yeah, of course.

Vanessa Gardiner: We don't know.

Catriona Attride: No, absolutely. I think it's quite clear that the benefits outweigh the negatives, which are fairly minor. And like you say, if you've got someone who is hell-bent on litigation, you're not going to be able to completely prevent that. But if you've got a solid agreement that's been prepared properly and in the right time and everything else and ratified with a postnup if need be, and reviewed periodically, et cetera, you're definitely setting both parties in the best course moving forward to protect inherited wealth, business wealth, assets from a previous marriage and all of those sorts of things. So, it sounds very much like this is a growth area.

Vanessa Gardiner: It really is. And we get more and more inquiries about preparing them. They are becoming far more commonplace than they ever used to be. And maybe, that might be partly, like you say, the newspapers, social media, television, all of this. They are big in America. They've been there for years. But actually, the benefits now are becoming more widely known and actually, yeah, it's a real growth area. And if you're not doing it, you should have a think about it. Maybe you should be doing it. But most certainly, this is becoming far more commonplace to do. Most definitely.

Catriona Attride: And I think it's definitely worth investing the time and money in at the outset to avoid potentially three, four times as much later on.

Vanessa Gardiner: Oh, absolutely. And just the fact that for most people, when they come to us at the beginning of a divorce, they're just like, "What am I going to get? How's it going to look?" They're looking for stability and certainty, and actually, these agreements do provide you with that from the outset. You know that this is, well, the minimum that you're going to get, basically, and over time, it might increase and it might be phased upwards. Or as you say, the more children you produce, you may get rewarded financially, who knows. Who knows. So there is a huge amount of benefit.

Catriona Attride: Yeah, and that sort of note, what are the strangest things you've seen someone, on either side, ask to have included in a prenup?

Vanessa Gardiner: We don't do that many really strange ones. Phasing, I think, is kind of a interesting one, where someone will say, "Okay, the longer she's married to me, then the more money she gets."

Catriona Attride: Right.

Vanessa Gardiner: And they'll set that out at the outset. Almost putting a value on... Well, actually they come to me for-

Catriona Attride: Time served.

Vanessa Gardiner: Yes, yes. A little bit like that.

Catriona Attride: If you can stick it out for 10 years, and you get long service award.

Vanessa Gardiner: You get more. And I have had discussions with people about this sort of moral clause. "Can we put moral clauses in there? What if they cheat? What if they have an affair?

Catriona Attride: I'm sure the court wouldn't necessarily be interested, because obviously we have a no fault divorce system, but do people want to put that sort of thing in? Because again, you hear of the American things, where if you gain more than three pounds, you've got to go off and go on a program and whatever else. Do people in this country want that sort of thing in their prenup, even though it probably wouldn't be binding? Or are they a bit more stoic about it?

Vanessa Gardiner: I would say a little bit more stoic about it. But I have had a few of the more moral inquiries about, "But what if they have an affair? Why should I have to give them anything?" Unfortunately, the advice has to be, "Well, we can suggest it, but the likelihood is that that would not be upheld." Because what goes on in the marriage in terms of the relationship, and if there's adultery, actually, that doesn't have any impact on the financial arrangements. Interestingly in financial proceedings, however, Section 25 Matrimonial Causes Act does have provision for conduct to be taken into account that it would be unreasonable to ignore.

Catriona Attride: Oh, okay.

Vanessa Gardiner: And that generally is more of a financial conduct situation, which you could potentially make provision for debts. If they run up a whole load of debts, then they should be responsible for them. But I've seen nothing too intriguing, but definitely people inquire about the more moral contracts, and sadly we do have to say, "Well, it won't be upheld, so we wouldn't recommend that you put it in there." Whereas they do seem to get away with a lot more over in America, I'll be honest with you.

The dog as well. Who gets the dog. That does come up.

Catriona Attride: Do you know what? I know somebody who's still really scarred by the fact that when her parents divorced, they fought over the dog more than they did about who was keeping her.

Vanessa Gardiner: Yes, exactly.

Catriona Attride: So that's a real thing, isn't it? Yeah, the pets. The pets of the marriage.

Vanessa Gardiner: Oh, and Air Miles.

Catriona Attride: Oh, really?

Vanessa Gardiner: Yeah, the Avios points. I'll be honest, that's a big thing. Who gets the Avios points. Not the Tesco Clubcard points, but the Avios points [inaudible 00:44:27] are extremely important and there has been some upset over who would get the Avios points.

Catriona Attride: Fantastic.

Vanessa Gardiner: You see a bit of everything, basically.

Catriona Attride: Yeah, definitely. Well, I think it's been really great to get that more in depth summary in terms of what they're about, and actually I think it's reassuring to anyone listening that these are a really valuable and useful document to have in place. And it's not too late if you're already married, if you're listening. So you can come along and do a postnup. And in fact I've had clients who, as part of family planning from the estate side where the big gifts are being made, that the children have then entered into postnups with their respective spouses because they've suddenly come into a lot of inherited wealth and it's important to the family to keep it in the bloodline. And in fact, one couple that we did one for... I think they'd been married 18 years or something and did one. Thankfully, happily, they're still together and hopefully they always will be. But they did it. And actually in some ways, the longer the marriage, the disclosure part is easier, because you pretty much already know. There's no surprises. You know what's going on. But I think it's really important that people do understand that these aren't just for before the marriage. They follow all the way through.

Vanessa Gardiner: Yep. And the family planning side, we are seeing that more and more, and I think that's a big part of the way we work as a team in Gateley as well. Of recognizing the tax planning on your side, and then bringing that over to us saying, "Right. Let's provide that protection further down the family chain as well and keep preserving that family wealth." That is something we're doing really a lot more of.

Catriona Attride: Absolutely. Well, Vanessa, thank you so much for your clear explanation on pre and postnup agreements. And thank you for listening.

Vanessa Gardiner: Thank you.

Catriona Attride: Thank you for listening to Talking Family and Wealth. To find out more about the series, please visit gateleyplc.com/talkingfamilyandwealth. From here you can subscribe for all updates, meet our speakers, and get more information on all of the topics being discusse

Gateley Plc is authorised and regulated by the SRA (Solicitors' Regulation Authority). Please visit the SRA website for details of the professional conduct rules which Gateley Legal must comply with.

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