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Prenuptial agreements (or ante-nuptial/pre-marriage contracts) have become increasingly popular in Scotland, with more couples wishing to make provision for what is to happen in the unfortunate event of the breakdown of their relationship.  

It could be said that entering into a prenuptial agreement is a very pessimistic way to commence a marriage.  It can however be a very effective financial planning tool for both parties and can help to avoid costly and drawn out litigation in the event of separation.  

In its barest form, a prenuptial agreement is akin to an insurance policy, allowing the parties the opportunity to plan together for the “what ifs”. It is there as a security for both parties, creating more certainty for them at the outset as they enter married life together.

So what are the main issues with prenuptial agreements?

1. Financial provision on divorce

Legislation sets out financial provision for parties on separation/divorce.  In terms of the division of matrimonial property, generally, both parties are entitled to receive a fair share.  This is generally presumed to be an equal share of the net value of all matrimonial property, although there are some exceptions and arguments which may be tendered to attempt to achieve an unequal division of the matrimonial property.  

2. Why should couples have a pre-nuptial agreement?

The mechanism for financial provision on separation as set out in the legislation may not always be the way the parties would wish their assets to be divided between them.  A prenuptial agreement allows them the ability to set out their very own provision for financial matters in the event of a separation.

A prenuptial agreement is first and foremost a contract between the parties.  The agreement can be tailored to the parties’ individual needs.  There is no standard form, with the terms often being rather bespoke to fit in with the couple and their intentions.  It can be as simple or as detailed as the parties wish.  A prenuptial agreement can be used to cover a variety of different circumstances:

  • It can be used to protect certain pre-marital assets which are brought into a marriage.  It may be that one or both parties has substantial wealth which has been accumulated prior to the marriage and the parties do not wish this to be mixed with any assets or funds accumulated throughout the marriage and similarly they do not wish any capital/income deriving from that wealth to constitute matrimonial property.

  • Often couples may be embarking upon a second marriage.  They may have accumulated assets that they wish to protect this time round going into the new marriage.  If they have been through the experience of divorce previously, they will likely understand the rights and potential claims and are more aware of what they wish to protect or particularly ring fence perhaps for children of their previous relationship.

  • A prenuptial agreement can assist in protecting inherited or gifted assets or funds.  Whilst assets which are acquired by way of gift or inheritance from a third party during the marriage are generally excluded from the definition of matrimonial property, if there is a change in nature of the asset during the course of the marriage, the asset could be converted into matrimonial property.   The parties may wish to make specific provision as to what is to happen to any such converted asset.

  • Another common purpose is to protect a party’s business interest.  It may be that a party is a sole trader prior to the marriage but during the marriage the business is converted into a partnership.  This kind of re-structuring would result in a change of nature of the business and thus could render the interest in the new partnership matrimonial.  Parties may accordingly wish to have a clause ensuring that all business interests be left out of account, particularly in the event of restructuring.

 
3. Enforceability of the prenuptial agreement in Scotland
 

It is a common misconception that prenuptial agreements are used only by celebrity couples and that they would hold no weight in the real world. However the family law legislation in Scotland allows a court to have regard to the terms of any agreement made between the parties as to ownership or division of any of the matrimonial property.  If a prenuptial agreement has been validly entered into and the terms of the agreement were fair and reasonable at the time of it being entered into, the agreement should be upheld.   It is apparent from case law that the court will not readily interfere in setting aside a prenuptial agreement provided the agreement passes the fair and reasonable test.  

There will inevitably be cases where on the breakdown of a relationship one spouse may argue that actually the agreement was not fair and reasonable at the time it was entered in to.  The legislation allows for the setting aside of an agreement or particular clauses in the event that this can be established, however the onus of proving that is on the spouse claiming that to be the case.  Perhaps in a case where insufficient information has been exchanged between the parties or where one party has not obtained independent legal advice on the agreement there could be more scope for persuading a court to set aside the agreement.  It is of note that the fact that where a prenuptial agreement perhaps provides for an unequal division, that of itself should not be enough to render the agreement unfair and unreasonable.   

It is good practice for both parties to seek independent specialist family law advice, as this will give more weight to the agreement and could assist greatly in the face of any legal challenge by one of the parties in the future. If an agreement is indeed to be made it is prudent to take advice well in advance of the date of the wedding and the drafting and finalisation of the agreement should not be left to the last minute.  It could drop off the priority list in the midst of other wedding preparations and worse still, it could be argued by an aggrieved spouse that they felt pressured into signing the agreement as the wedding was just around the corner.   

It is difficult to predict exactly what will happen in the future, neither of the parties nor the family lawyers involved have a crystal ball.  All sorts of questions could remain, such as what size of family the parties may go on to have, what sort of investments will they go on to make, will they re-structure their business or indeed receive any gifts or inheritances throughout the duration of their marriage?  Whilst it won’t be possible to provide for every single eventuality, the advantages of having a prenuptial agreement in place are clear and certainly outweigh the disadvantages which may be encountered in its absence if the parties do have specific interests which they wish to protect.

 
 

 

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