Love them or loathe them, pre-nuptial agreements have been around for centuries and are here to stay. Their popularity (or otherwise) has perhaps tended to reflect the social mores and fashions of the time and their use therefore has been variable. In the 1960s and 70s when everything was “cool” and the young were enjoying new freedoms that were unheard of only a generation before, pre nups were, unsurprisingly, rather thin on the ground. The marriageable generation had other priorities and it would have been seriously “uncool” to have been a party to a prenuptial agreement!
How things change. Today we find ourselves in an altogether different culture. Statistically, fewer eligible people marry. The divorce rate is said to be around 30%. People marry later in life, often once they have accumulated some property or savings. There are many second or third marriages, and divorcees emerging from previous failed relationships understandably want to hold on to what they have negotiated hard to keep.
This approach is not incompatible with the basic principles of Scots divorce law. Since 1985 the law regarding division of matrimonial wealth has proceeded on the basis that the relevant wealth generated by the couple between the date of marriage and the date of separation – i.e. during the active period of the partnership – is what needs to be divided fairly between them on divorce.
What an individual brings to the marriage may be excluded, but the protection offered by being excluded from the ”pot” (because (i) the wealth was accumulated before marriage, or (ii) the wealth was inherited or (iii) the wealth was a gift from someone out with the marriage), is frequently lost as a consequence of activity during the marriage. This can happen quite innocently – and usually does!
This is a difficult area of law which is not helped by conflicting case reports from the courts. It is a topic which ought to be discussed with a skilled family lawyer (rather than your accountant or IFA). There are many hidden traps for the unwary!
This is especially so in the context of an individual involved in a family business who is thinking of getting married. So, for example, if an unmarried woman is one of four partners in the family firm started by her grandfather, and then marries, her share will not be matrimonial property (as she owned it before marriage). However, let’s look at what might happen if, after marriage, the partners decide to convert the partnership into a limited company. Two of the original partners drop out and the shares are allocated 50% to each of the remaining partners (who are now directors). This simple act has the effect of bringing the (now married) woman’s business interest into the matrimonial pot. The protection available to the partnership is not available to the company, because this was a new entity created after the marriage. It will then become the subject of difficult and often expensive legal argument.
There is a simple and inexpensive solution to this potential heartache! Get a pre-nuptial agreement and put in place agreed protective measures before you start. If your spouse to be is unhappy about that, it’s surely telling you something! Okay, it’s boring, but most sensible things are, and once you have a pre-nup in place you can relax and enjoy your marriage. That’s a price worth paying! A properly drafted pre-nup will be upheld in the Scottish courts. The position in England is less certain at the moment.
Who should consider a pre-nup?
- Anyone thinking of getting married or entering into a civil partnership. There is also an equivalent model for couples who do not intend to marry but who do want to formalise certain aspects of their finances.
- Anyone with assets in their own name who is intending to marry.
- Anyone with an interest in a family business of any kind (especially farming enterprises).
- Anyone who has been stung once before on divorce and who would prefer to avoid an encore.
Money and security aren’t everything of course, but can be if you don’t have any – especially if your divorcing spouse ends up with some of the wealth generated by your grandfather. In today’s climate, a pre-nuptial agreement is a small investment for a big return.