Why pre and post-nuptial agreements are not just for the rich and famous

And with around one in three marriages in Scotland ending in divorce, it would seem a sensible step to discuss a pre-nuptial agreement - before a marriage - or a post-nuptial agreement - for those who have already tied the knot.

So, what exactly are pre- and post-nuptial agreements? Burke says: “They are a practical form of financial planning which anyone who is getting married, entering into a civil partnership, or is already married, may wish to consider.”

She adds that they can be particularly relevant for “blended families”, where there are children from previous marriages who are likely to inherit or be gifted wealth.

The Family Law (Scotland) Act 1985 provides that everything someone acquires while married is “matrimonial property” - with only a few exceptions. The legislation states that assets should be shared fairly, which usually means equally, in the event of divorce.

“But you might not want the standard rules about inheritance or division of matrimonial property on divorce to apply. And you may want to protect certain non-matrimonial assets which you brought to the marriage, or which were gifted to you, or inherited during the marriage. Even restructuring of pre-marriage business assets, or re-investment of wealth, will inadvertently put it in the matrimonial pot for sharing, often leading to protracted and costly disputes when couples separate,” adds Burke.

Another misconception is that pre- and post-nups are a recent phenomenon, whereas in fact they have a long history. They have been prevalent in Scotland where the law has traditionally placed considerable weight on them; more so than the law in some other countries, including England, says Burke.

Records show that Flora MacDonald - famous for helping Bonnie Prince Charlie escape from Scotland - had a pre-nup in place when she married Allan Macdonald of Kingsburgh in 1750.

Burke emphasises that pre- and post-nup agreements must be done properly, and with both members of the couple seeking independent legal advice.

Expanding on points to take into account, she says: “One of the first things to discuss is where the parties might end up divorcing, as this is crucial. A Scottish pre-nup might need to be expanded to stand up not just in Scotland, but in other countries as well if it is possible that any divorce might occur there. We explore whether the individuals involved might move abroad, whether they have assets overseas or spend appreciable periods of time elsewhere, for example, in a second home.”

Burke adds: “There are three conditions that must be met for agreements to be considered robust. These are that independent legal advice was given, there was no pressure on either party to sign and the agreement was fair and reasonable at the time it was entered into.”

“In essence, with an agreement, you're looking to contract out of, or depart from, what the law would otherwise determine in terms of financial provision on divorce. In most, but not all cases, the further we depart from that, the more likely it is to be considered unfair and unreasonable.”

“I would recommend that people allow about six months for agreement to be reached and formalised in a pre or post nup, rather than leaving it to the last minute.”

She says: “Pre- and post-nup agreements are often led by the first generations, where parents are anticipating making substantial gifts to their adult children as part of inheritance tax planning exercise, or for business succession planning reasons. They want to pass wealth, or a family business, down while ensuring it stays in their family.”

Burke has negotiated pre- and post-nups for many different types of people, ranging from well-known figures in the entertainment industry, the internationally wealthy and the entrepreneurial elite, to those looking to protect fairly modest pre-marriage or gifted wealth. Limiting the extent of any future dispute and the associated legal fees is a common driver; and we often see those going into second marriages looking for such agreements in a desire to avoid the sort of experience they had first time round.

“People’s wealth rarely remains static, so agreements should be seen as living documents and kept under review,” says Burke. “You’re going to the expense of having an agreement in place, so you should make sure all your professional advisers, such as your accountant and financial planner, are aware of it and that they have a copy of it.”

She concludes: “Pre-and post-nup agreements are incredibly useful tools and there is a growing awareness of them. They are suitable not just for high net worth couples with complex assets, and they are becoming increasingly popular across wider society.”

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