Protection is at heart of prenups
IT HAS all the hallmarks of a complex divorce. Two partners who have had a long-term union, and as a result have complicated financial and property arrangements which will take extensive unravelling, with neither party likely to be entirely satisfied.
In the case of Scotland and the rest of the UK, the marriage might survive (I’ll leave the merits of this to the politicians) but for the divorcing couple, a prenuptial agreement can make a world of difference.
In England and Wales, prenups are not currently legally binding. However, that could be about to change, with a report published by the Law Commission in February – Matrimonial Property, Needs and Agreement – including a draft bill which would change their legal status south of the Border.
The Scottish perspective gives a good idea how couples use these agreements.
Once the preserve of the rich and famous, today it is reasonably common for a prenuptial agreement to be in place. Although it could never been seen as wildly romantic, most people, on reflection, think it is a sensible thing to do.
Those most likely to enquire about prenups are people who have significant pre-marriage wealth or come from wealthy families, often where funds have been contributed by the “Bank of Mum and Dad” who want to make sure that their gift to their own child remains just that, come what may.
Separately, there is a growing recognition among second-time-arounders that a prenup is a sensible thing to put in place. Coming out of a divorce badly bruised, and usually less well off, means you want to try and protect what you still have, and ensure any children from the first marriage have their inheritance protected. The driving force behind these prenups tends to be to avoid any dispute by having everything neatly wrapped up at the start.
At its most basic, a prenuptial agreement is a contract, and a party who signs such an agreement would not be easily let out of it. Additional legislative rules stipulate that an agreement of this type must be fair and reasonable at the time it was entered into. There is no real difference in substance between a prenuptial agreement and a postnuptial agreement – their essence is to make financial provision in the event the couple separate and divorce at some point in the future. In other words, they contract away from the normal financial provisions set out in the Family Law (Scotland) Act 1985.
The most common type of agreement ring-fences assets which exist prior to marriage. While legislation already protects such assets, life is not static. The purpose of ring-fencing is to identify the separate property so that if that particular item is sold and something new bought with its proceeds, the same protection applies by virtue of the contract to the new item as applied to the original asset. Most people view that as “fair and reasonable”.
That is the simplest type of prenup, but for many people it’s all they really need or want. It can be achieved for less than the price of a wedding dress and could be worth a great deal more if things do go wrong. Such agreements are becoming more routine, perhaps due to more couples getting married once they have already established their career and purchased their first property. Pragmatism sometimes trumps romance, and the high divorce rate means many people are open to the idea of a prenup.
An agreement of this sort is not a complete answer, however, and does not guarantee the parties will be free from any claim for financial provision on divorce, for example for aliment (maintenance). For some, a far more wide-ranging prenuptial agreement, which sets out all the financial provisions on divorce, is required. These are much more complex documents and specialist advice is needed.
Prenups should be reviewed regularly, particularly at the main events in life such as buying and selling property or the birth of children. A prenup cannot be varied without the agreement of both parties; however matters may arise in the course of the marriage which simply were not in contemplation at the time the agreement was entered into, and it may be appropriate for some sort of variation to be drawn up – for example making provision in relation to one party giving up a career to look after children.
As for Scotland, well, you don’t get many divorces after 307 years, so I think that might be beyond a family lawyer.
• Janice Jones is a partner in Harper Macleod’s family law team