Shona Templeton: More couples to love, honour and obey their prenuptial agreement

PRENUPTIAL agreements were back in the spotlight last week when the UK Supreme Court ruled that a prenuptial agreement was binding in the case of a German paper company heiress.

Until recently there was no culture of prenuptial agreements in Scotland. They were considered the preserve of the wealthiest of celebrity newlyweds who were hoping to protect their assets.

However, it is increasingly evident that prenups are no longer the exclusive territory of the rich and famous and are seen as a sensible means of deciding how assets should be divided in the event of a marriage breakdown. A poll released this month found that nearly half of 18 to 24-year-olds in the UK want a prenuptial agreement before they tie the knot. The survey of 1,000 people discovered that 44 per cent of respondents would be willing to sign a pre-marriage contract before getting married, as would 42 per cent of 45 to 54-year-olds.

Prenuptial agreements address the possibility of future separation, divorce or dissolution. Effectively, with a prenuptial agreement both parties are entering a contract, before entering the marital contract; the purpose being to protect both parties involved and to provide certainty and control over future financial arrangements, bearing in mind the wide discretion of the courts.

North of the Border prenuptial agreements are considered to be binding, although this matter has not yet been fully tested by the courts in Scotland. For the agreement to be binding there are three main requirements: it must be fair and reasonable; the other party needs to have had the opportunity to receive legal advice and there must be no pressure on the other party to sign the agreement.

For Scots law to apply, the parties must establish jurisdiction in Scotland. There are complicated rules regarding jurisdiction, but in Scotland it usually entails residence or a strong link with the country.

Scottish law places considerable weight on the sharing of matrimonial property. A distinction is set between "matrimonial" and "non-matrimonial" property. Ordinarily, matrimonial property is in the "pot" for divorce, and non-matrimonial property is kept out. Effectively this means the parties can retain assets which they brought into the marriage and share assets purchased during the marriage.

These factors were in contrast with English law, where prenuptial agreements were not binding but could be taken into account by the court. This was the approach considered last week when the UK Supreme Court ruled a prenuptial agreement was binding in the case of a German paper company heiress. Katrin Radmacher's ex-husband Nicolas Granatino went to the Supreme Court after appeal judges reduced his divorce settlement from more than 5 million to 1m. The Supreme Court said it agreed that in the right case such agreements can have decisive or compelling weight.

The case has been seen by lawyers as a test as to whether "prenups" were applicable in England and Wales. The justices said following their ruling "it will be natural to infer that parties entering into agreements will intend that effect be given to them". Lord Phillips, president of the Supreme Court, said the courts would still have the discretion to waive any prenup or postnup agreement, especially when it was unfair to any children of the marriage. It would appear the courts will look at such agreements on a case by case basis.

The Law Commission is due to report in 2012 on whether a change in the law should be made so prenuptial agreements are fully enforceable. In addition to prenuptial agreements, there is nothing to stop couples who are already married entering into a postnuptial contract in order that the spouse who may have potential to earn significant wealth during the marriage can ring-fence future assets.

In the US, it is increasingly common for businesses to recommend, and indeed some insist, that directors or partners have postnuptial agreements in place if they are already married in order to minimise the financial impact of divorce both on the individual and on the business.

Prenuptial and postnuptial agreements are here to stay, and in fact are set to increase, given the economic downturn and a desire to protect assets.

Shona Templeton is a partner at law firm HBJ Gateley Wareing