Post-nups: worth it for a £2m house?

This article is taken from Merryn Somerset Webb's free weekly personal finance email, MoneySense. Click here to sign up now: MoneySense

On my book website (www.loveisnotenough.co.uk) I have an Ask Merryn' section. Here anyone who feels I haven't covered a subject properly in the book, or who can't be bothered to read it, can ask me questions about their personal finances.

So far the questions have been pretty straightforward (Do I really need a pension? How do I invest my Child Trust Fund?), but last week I got an unexpected one. "I have recently married" it said, "But now I feel that a pre-nup might have been a good idea. Is it too late to arrange one?" It had never occurred to me to think about this.

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Pre-nups I know all about, and given how much later we all get married these days I think they do make sense everyone in Hollywood has one. By the age of 35 or so you will (hopefully) have built up something in the way of assets. You may have some equity in your house, a reasonable sum in an ISA and some pension savings, for example. And if your marriage fails after a year or two you won't want to share those hard-won assets with your other half. So you need to think about ring-fencing them.

Pre-nuptial agreements are not legally binding in the UK but that doesn't mean they aren't worth having. Why? First because discussing one means that you both have to make full financial disclosure and that as a result should end up with a clear idea of each other's financial assets and aims. It's a good way to get the conversation going to force communication.

And second because if you do end up in court they will give a judge an idea of what your pre-marital intentions were and that makes a difference: the Sunday Times points to the case of M v M in 2002 which concerned a five year marriage with one child. The wife had agreed to a settlement of £875,000 in a pre-nup and, despite claiming £1.25m, that's precisely what she got.

More disappointed still must have been the wife in the 2003 case of K v K. The husband was worth £25m but the wife had agreed in the pre-nup to getting only £125,000 if they separated (which they duly did after 15 months). Anyone who thinks the divorce laws in the UK are over-weighted towards women should note that the court upheld the contract: she got £125,000.

FREE personal finance email: This article is taken from Merryn Somerset Webb's free weekly personal finance email, MoneySense. Click here to sign up now: MoneySense

But what of post-nups? It is not really the business of MoneySense to wonder if the asker of the question above might not have been better doing a bunk at the altar so we'll leave that aside and just look at the viability of this kind of contract. In the US, says the FT, these have become the "latest accessory for the super rich," particularly those working at hedge funds. At least one US fund has started refusing to take on new partners until they sign a post-nup barring their spouses from making any claims on the fund. Even those firms that don't actually mandate them often "encourage each other to sign them to protect both the firm and themselves."

This clearly makes sense for the man (if in an unpleasantly cold blooded way) but it is hard to see quite how it makes sense for the financially weaker partner in a marriage usually the woman: all it does for them is make it easier for their husband to dump them for a younger model later.

So why do they do it? To preserve their marriage. One Manhattan divorce lawyer told the FT: "She's bargaining for the marriage and the husband is bargaining for divorce."

Good news then for put-upon wives: post-nups are much less likely to stand up in court than pre nups. Lisa Fabian Lustigman, a family lawyer at international law firm Withers LLP explains: "The reason for this is simple a judge will set aside any pre nuptial agreement if they consider it to have been signed under any form of undue pressure. The same principle applies to mid- and post-nuptial agreements."

Such pressure is easy to imagine in the case of a contract signed after a marriage one party may feel they have to sign the agreement or a separation will follow." Post-nups only tend to come up in conversation when a marriage is already in trouble. This leaves them very "open to challenge," particularly if a judge considers them to be in any way unreasonable.

So to answer the question on post-nups, if your marriage is in trouble and you're the main breadwinner and you don't want to share you'd be wise to push for one just in case it helps you out when the time comes. If you aren't the main breadwinner you should probably avoid signing one but also remember that if you sign it under duress it isn't valid anyway.

That said, there are some times - says lawyer John Nicholson in the Sunday Times - when having a post-nup does make sense and will probably be upheld. An example? "If, say, the wife's father said he would buy the couple a £2m house provided she kept the property in the case of divorce, both parties might feel it in their interests to sign a post-nup."