Reconciliation contracts have been in the spotlight recently after golfer Rory McIlroy and his wife, Erica Stoll, ‘un-divorced’ weeks after announcing their separation.
U-turn divorces in the UK are not uncommon, family lawyers tell Spear’s, driven by various factors, including emotional considerations, family dynamics, and financial implications. Divorce is expensive, especially for ultra-high-net-worths such as McIlroy who is reported to be worth £225 million. The unromantic reality of dividing assets is often what brings couples to reconsider their decision, focusing their minds on alternatives, such as a reconciliation contract that aims to preserve and strengthen relationships by fostering trust, understanding, and cooperation.
While it is not known whether McIlroy and Stoll, who have been married for seven years, engaged in a reconciliation contract or a postnup, family lawyers agree these agreements can be of particular value to high-net-worth (HNW) individuals.
Spear’s Top Flight family lawyer and Spear’s Family Lawyer of the Year 2019 Jane Keir partner at Kingsley Napley, and Top Recommended family lawyers, Payne Hicks Beach partner Nick Manners and Emma Gill from Vardags give Spear’s their insight into reconciliation contracts and what they might mean for UHNW marriages.
What are reconciliation contracts?
Commonly seen in the US, reconciliation contracts are akin to post-nuptial agreements in England and Wales. They are a strategic tool for couples looking to reset their relationships, providing a structured foundation for restoring marital harmony. They can also be invaluable if a second attempt at the relationship ultimately fails.
Unlike traditional post-nuptial agreements that focus solely on financial matters, family lawyers tell Spear’s that reconciliation contracts can encompass broader agreements such as commitments to curb addictions or enhance the practical aspects of marriage.
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Keir tells Spear’s: ‘A reconciliation contract is essentially a postnuptial agreement with relationship pledges on top. What it means is that the financial basis of a split is agreed and in the drawer if you like – ready to go – if either party breaks promises underpinning a reconciliation.
‘This might be a promise never to be adulterous again, to curb addictive behaviour or commit more time to their spouse. One situation I was involved with was where the second wife felt she needed greater financial certainty over her share of her husband’s assets given his regular commitments and financial contributions to his children by his first marriage.’
People often pause and reconsider their financial futures for a number of reasons and that’s where postnups are very beneficial, explains Gill.
What are the benefits of using reconciliation contracts for (U)HNWs?
The stakes are high in relationships of the super-rich, with substantial assets, reputations, and public interest involved. As a result, reconciliation contracts can have ‘huge benefits’ for the ultra-wealthy.
These contracts often ensure that an economically disadvantaged spouse receives assets or promises, creating a fairer financial balance and instilling confidence in the relationship’s future, Manners explains.
‘It can also provide one party with a greater degree of financial security so that long-term they know their financial position is not exposed. This then avoids the pain, cost and emotional stress of going through an actual divorce,’ he continues.
He adds that reconciliation contracts allow parties to address marital issues privately, away from the public scrutiny of a court.
Gills says post-nups can ‘have huge benefits for the rich and super-rich, as they allow couples to map out their future’.
‘Postnups are focused upon providing financial clarity. Naturally, there has to be a degree of cooperation between the parties, because once you are married, the bargaining tool of “will you, or won’t you marry me?” has disappeared.’
A reconciliation contract can appear particularly appealing when divorce talks turn to cost of separating.
Keir says: ‘It is not unheard of for couples to press pause on divorce proceedings and decide to try again.
Sometimes this is for emotional or family reasons but also it can be driven by finances. Divorce is expensive and when someone sees the reality of how assets are to be shared or the fact they may be entitled to less than they had anticipated, it can certainly focus the mind.’
Keir says that while the relationship pledges are not enforceable if one party decides again that things are not working out, the financial terms of the split are pre-agreed.
‘This avoids a protracted and expensive divorce wrangling process. And usually it means that finances have been agreed at a time when a couple are being reasonable and fair to each other so the terms are likely to hold.’
Do reconciliation contracts work?
While pre and postnuptial agreements are well-established in English and Welsh law, with a robust body of case law supporting their enforceability, reconciliation contracts are relatively new and, as a result, their legal standing is less defined.
That said, there is some evidence they do work.
Keir says she has seen reconciliation contracts ‘work as a way of resetting a relationship and the foundation of restoring a relationship to health’.
‘But also I’ve seen them become a helpful tool for when a try-again relationship breaks down,’ Keir adds.
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Reconciliation contracts derive their legal viability in England and Wales from the precedent set by Radmacher v Granatino and subsequent case law that has upheld prenuptial agreements. The landmark 2010 Radmacher case court gave fairly-contracted prenuptial agreements decisive weight in English divorce law for the first time.
As long as the terms are fair and both parties willingly accept them without undue pressure, these contracts are likely to be seen as a blueprint to be followed in the event of a reconciliation breakdown.
Gill says: ‘Following Ayesha Vardag’s representation of Katrin Radmacher in 2010, these types of nuptial agreements absolutely do have weight. As practitioners, we are seeing them more and more – in the High Court, anecdotally, around 50 per cent of the cases involve an agreement of some sort.’
She adds: ‘What is really important is that these agreements don’t set out behaviour conditions – they are not a valid feature in England and Wales, although you frequently see them in overseas jurisdictions.’
Will reconciliation contracts gain popularity in the UK?
Manners anticipates that reconciliation contracts may gain traction in the UK over the coming years. As nuptial agreements become more accepted, the appeal of reconciliation contracts is likely to grow among couples seeking alternatives to divorce.
Meanwhile, Gill adds: ‘Postnups really give people the opportunity to reflect creatively about what they want their future to look like, with the purpose of staying together but having a back-up plan if things do go wrong.’
