The rise of the post-nup – how to protect your family finances against divorce

Divorce is on the rise it seems, with the most recent data indicating that the number of opposite-sex divorces in England and Wales increased 18.4% on the previous year to 107,599 according to the Office for National Statistics. With unhappy couples confined to home for many months during the pandemic, a surge in marital break-ups is expected. Law firms have seen an uptick in divorce enquiries and the charity Citizen’s Advice recently reported a sharp increase in online visits to its divorce-related guidance pages.

Much has been written about the use of pre-nuptial agreements to protect your financial position in the event of a divorce, or offsetting a pension against a property during the settlement process, but there is a new trend rising in the families of currently happily married couples – the ‘post-nup’ agreement. Gary Smith, chartered financial planner at Tilney, one of the UK’s leading wealth management firms, looks at how this can help protect a family during a divorce.

“Going through a divorce is obviously extremely distressing for those involved, especially when it gets to the part where the couple is trying to divide their assets. While a pre-nuptial agreement can be signed ahead of a marriage to protect certain assets from a potential divorce, we are noticing an increasing number of families introducing a post-nuptial agreement, to protect any assets gained during the marriage.

“How it essentially works is that parents or grandparents may wish to gift their child or grandchild with some money, a deposit or an outright property, or perhaps some shares in the family company. If they come to this decision after their child is married, there could be the potential for the child’s spouse to seek to include the money or property in a financial settlement in the event of a divorce. The post-nup can be written and signed, by the couple and the family members making the gift, to ensure the gift would be off limits during any potential divorce. The spouse would have their own solicitor approve the post-nup to ensure the process is unbiased and everyone knows what they are signing.

“The purpose of a post-nup is not to deliberately keep a spouse from being treated fairly in the event of a divorce, rather to ensure a property or shares in a business do not actually leave the family. Indeed, I have been involved in cases where the spouse is promised a very generous settlement to offset the fact that a house wouldn’t be involved in a potential divorce.

“Post-nups can also be used to stop a spouse automatically inheriting family property, shares or a large gift in the event of the child’s death. Again, in most cases, the spouse is well provided for in the post-nup.

“As we are seeing an increase in parents giving their children either large financial gifts or deposits for a property during their lifetime, rather than leaving everything in their will to be divided up when then die, it is understandable that we are seeing a similarly large increase in the number of post-nuptial agreements. These can be a little complex and it is very important to take both legal and financial advice before embarking on any decision.”