When Jay Z married Beyoncé, she signed a prenuptial agreement that gave her a cool $5 million for every child born in marriage and $1 million for every year married.
Essential, you’d think, for a power couple of their wealth. Yet, while prenuptial cases might seem a little too Hollywood – and not terribly romantic – they’re enforceable in Scotland and increasingly popular.
They may feel like a modern concept, but marriage contracts were common in Scotland from around the 14th century onwards, and spelled out the financial arrangements between the couple’s families. Enforceable by the courts, they typically helped to protect the wife’s property.
These days a Prenuptial or Cohabitation Agreement are legal contracts that set out how a couple would organise their affairs and divide their assets if the relationship were to end. People choose to ‘ring fence’ pre-relationship assets – often that includes a business.
Yet for many business owners and executives, normally astute in making realistic projections for the years ahead, contingency planning in the context of personal relationships isn’t always standard.
Take a fairly recent and very complicated case involving a Scottish food sales business set up by the husband pre-marriage. The relationship broke down and his business was brought into the split of assets on their subsequent separation. It was argued to be matrimonial property – the husband changed the nature of the business during the marriage, made his wife a company director and she was given various admin tasks.
More family lawyers are encountering similar situations. Married business owners make tax efficient decisions whilst all is well in their personal lives. However, if a spouse is brought into a partnership to reduce tax liabilities, they may have inadvertently “converted” the business into a matrimonial asset.
It’s not just an issue for married couples. The Family Law (Scotland) Act 2006 created new rights for cohabitants, giving an estranged partner the right to seek financial compensation. Even though this legislation is now more than ten years old, there’s a lack of awareness that it even exists. As more people marry or cohabit later in life, there are more complicated assets to consider. Family lawyers often see people who have married or cohabited a second, or indeed third, time – their legal and financial considerations are even more complicated.
Take Scots businessman Duncan Bannatyne, who endured two expensive divorces. Asked if he would consider a prenup in the future, he responded by saying he felt it “should be as much a part of the wedding planning as hiring a venue or choosing flowers”.
Prenups are still not regarded as the norm. Yet they are relevant to an increasing number of Scots – even if their bank balance doesn’t quite match that of Jay-Z and Beyonce.
Jenny Broatch is family law specialist at Pagan Osborne.