05 Sep 2012

Pre-nuptial Agreements and their position in Scots Law

Pre-nuptial Agreements and their position in Scots Law

Leah Bowman, Senior Solicitor, looks at Pre-nuptial Agreements and their up-to-date position in Scots Law.

Leah Bowman, Senior Solicitor, looks at Pre-nuptial Agreements and their up-to-date position in Scots Law.

Historically, Pre-nuptial Agreements (also known as Ante-Nuptial Agreements and Pre-marriage Contracts) were considered to be an unromantic notion of the ‘rich and famous’ - contracts used by Hollywood stars, ahead of their marriage, to protect their vast wealth, both already acquired, and that yet to be accumulated. They were thought of as having little relevance to those of a more modest means.  In addition to this, many members of the general public believed that such an Agreement was unenforceable, meaning that this type of Agreement was rarely used.  However, Pre-nuptial Agreements are now gaining support in Scotland, and are increasingly finding their way on to the wedding planning checklist for the modern marriage.  

What are they?

A Pre-nuptial Agreement is an agreement or contact made by a couple prior to their marriage or Civil Partnership to regulate matters should they subsequently separate, divorce or dissolve their Civil Partnership. 

What can Pre-nuptial Agreements cover?

A Pre-nuptial Agreement can contain anything that the parties choose and agree upon, provided of course that it is signed.  Commonly, Pre-nuptial Agreements include provisions for; the division of the parties’ property on separation or divorce, any rights to aliment/maintenance after the marriage has ended and rights of succession in the event of the death of one of the parties.  Each Agreement will be unique and it should be drafted to reflect the wishes and the circumstances of the couple.  

Why a Pre-nuptial Agreement might benefit you

One reason that Pre-nuptial Agreements are finding favour may be linked to figures released in the Statistical Bulletin: Crime and Justice Series: Divorces and Dissolutions in Scotland, 2009-10 (the most up-to-date data in this regard).  This shows that people are now getting married later in life than ever before.  Because of this, it is possible that individuals will already have fairly complex property arrangements in place.  For example, one person might own a property ahead of their marriage, and then sell that property during the course of their marriage, and acquire another asset or assets from that same source of funds.  In accordance with the definition of ‘matrimonial property’, as contained in section 4 of the Family Law (Scotland) Act 1985, the newly acquired asset or assets would fall to be included in the overall pool of matrimonial property if the couple were to subsequently separate or divorce.  It would be up to the party with the asset or assets to advance a ‘source of funds argument’ to have the asset or assets (or part thereof) excluded from settlement negotiations.  This might mean a lengthy and costly negotiation or even a court battle.  Whereas, had the parties entered into a Pre-nuptial Agreement, they could have provided for the original asset, and any asset or assets subsequently acquired from it, being excluded from the pool of matrimonial property from the outset. 

Pre-nuptial Agreements can be particularly attractive to those who have acquired assets prior to their marriage, or indeed to those who are intending to marry for a second time.  The Statistical Bulletin also shows that of the 20,346 individuals granted a divorce in 2009-10, 1,852 males and 1,729 females, had already been divorced at least once, at the time of their marriage.  Many people may also wish to use a Pre-nuptial Agreement to protect their assets for their children from a previous relationship.  

Enforceability

Although the enforceability of a Pre-nuptial Agreement has never been fully tested in the Scottish courts, it is generally accepted by academics and solicitors alike, that the Scottish courts would treat a Pre-nuptial agreement like any other contract.  That is, if it had been entered into freely, then it is expected that the Courts will generally hold it to be enforceable.  However, because the Agreement is designed to regulate financial matters on divorce, it falls under section 16 of the Family Law (Scotland) Act 1985, which provides that either party can apply to the Court to have the Agreement set aside or varied, if it was not fair and reasonable at the time it was entered into.  Case law would suggest that the Courts do not set aside or vary Agreements readily.  However, careful drafting of such an Agreement can mitigate the risks of any such challenge in the future. 

Legal Advice

Pre-nuptial Agreements can be beneficial but they do require careful drafting to ensure that they are likely to be enforceable at a later date.  It is suggested that legal advice should be obtained as early as possible in advance of the marriage/civil partnership if a couple wish to enter into a Pre-nuptial Agreement. 

Leah Bowman, Senior Solicitor


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