Post-nuptial agreement solicitors

Understanding Post-Nuptial Agreements

Definition and Purpose

A post-nuptial agreement has the purpose of protecting assets which parties bring to marriage in the event of separation.

It is a legally binding agreement entered into after marriage and will narrate what is to happen in relation to certain assets held by parties in the event of separation with the ultimate objective being that those assets are treated as separate property compared to other assets acquired during marriage which will be considered as matrimonial property.

The primary objective of parties when entering into terms of a post-nuptial agreement is to ringfence and protect assets they are bringing to a marriage to ensure that they are not treated as matrimonial property and their value being included in the overall division of the net assets on separation.

It is crucial for parties to seek advice in early course if they are to marry and wish to enter into terms of an agreement, known as a pre-nuptial agreement.

A pre-nuptial agreement should not be signed too close to the wedding date as it is more susceptible to being challenged. It is important that parties are given a sufficient period of time to consider the terms of the agreement they are entering into therefore early advice should be sought. However, where advice is sought too close to a wedding, we would advise that parties enter into terms of a post-nuptial agreement.

It is worth noting that where parties enter into terms of a post-nuptial agreement that they are already married therefore there is more of an element of good faith between the parties in concluding its terms.

Legal Framework

It is a relatively common misconception that postnuptial agreements are not legally binding. There is a lot of misinformation to suggest that they are not legally binding. However, a post-nuptial agreement drafted by specialist family lawyers and where both parties have the opportunity to seek separate and independent legal advice is a legally binding document.

There remains a risk that the agreement could be challenged but where parties seek separate legal advice and in particular, take advice on what might make an agreement open to challenge, they will significantly protect their positions.

Whilst there are provisions in the family law legislation to allow for a postnuptial agreement to be varied or set aside, the courts have taken the approach that they are reluctant to interfere with a contract validly entered into between two parties. This applies particularly where parties have had the opportunity to seek separate and independent legal advice and have been given sufficient time to consider the terms of the agreement.

The Role of Solicitors in Drafting Post-Nuptial Agreements

Independent Legal Advice

It is vital that both parties obtain separate legal advice in relation to the preparation of a post-nuptial agreement. These agreements are complex in their nature and it is crucial that both parties are separately advised of their options.

The starting point is for parties to fully understand the concept of matrimonial property and what would happen in the event of separation were the parties to separate without such an agreement being in place.

By taking separate legal advice, parties will be fully aware of the concept of matrimonial property and what would happen if parties were to separate without a post-nuptial agreement being in place.

It is important when considering the terms of the post-nuptial agreement that it should not depart too much from the potential outcome determined by the family law legislation. If it does so, there is more risk of the agreement being challenged.

However, a post-nuptial agreement can be tailored to what parties aim to achieve and by taking specialist family law advice, parties can ensure that the agreement is drafted appropriately.

A post-nuptial agreement should not be drafted without specialist family law advice. These types of agreements are complex in their nature and it would be extremely difficult for parties to draft a comprehensive and enforceable agreement in the absence of specialist legal advice.

The biggest risk for parties when considering entering into terms of a post-nuptial agreement without legal advice is that the agreement is challenged in the future. The family law legislation makes provision for agreements of this nature to be set aside or varied. Without parties having taken specialist legal advice on the content of the post-nuptial agreement, there is a significant risk that such an agreement could be set aside in the future and some, or all of the agreement declared null and void.

Financial Disclosure

When considering the terms of a post-nuptial agreement, parties should consider what assets they are bringing to the marriage and which they wish to be regarded as separate property in the event of separation.

It is common for parties to wish to ringfence heritable property which they owned before the marriage but where the parties may live together both before and after marriage. Consideration can also be given to the proceeds of sale of heritable property owned by one party before marriage where those proceeds are then used to purchase another heritable property, either solely or jointly, during marriage as the property would fall to be included as matrimonial property.

Consideration may also be given to elements of a Company i.e. a shareholding which one party wishes to protect in the event of separation.

Key Components of a Post-Nuptial Agreement

Maintenance Payments and Financial Support

Consideration can be given to whether parties wish to narrate in a post-nuptial agreement about making provision for spousal aliment on separation. Spousal aliment is maintenance paid to a spouse on separation which is paid where it can be justified based on the needs and resources of the parties.

It is important to seek specialist family law advice when considering this matter to ensure that the agreement is drafted in fair and reasonable terms and does not depart greatly from the terms provided in the family law legislation. Advice should be sought on whether assets and/or income which may be ringfenced as separate property in the post-nuptial agreement are to be included or excluded when considering any liability for spousal aliment. A post-nuptial agreement will always be drafted to the individual circumstances of the parties therefore it is vital that specialist legal advice is sought to explore those circumstances and at the same time, consider the legislative framework.

Business Assets and Matrimonial Property

It is common for a post-nuptial agreement to address how interests in a business are to be treated on separation. A party may be bringing an interest in a company and a shareholding into a marriage which they wish to ensure is ringfenced in the event of separation. Consideration can also be given to the situation where the company and/or shareholding changes form during the marriage, for example, a restructuring of the company.

The treatment of interests in a company and a shareholding can add a further complexity to a post-nuptial agreement therefore it is important to seek specialist family law advice.

Circumstances leading to post-nuptial agreements

A post-nuptial agreement is commonly entered where legal advice in relation to a pre-nuptial agreement is sought too close to the wedding date. It is crucial that both parties are given sufficient opportunity to consider the terms of an agreement, seek separate and independent legal advice and given time to reflect before signing the agreement. Where advice is sought in relation to a pre-nuptial agreement but the date for the wedding is within a couple of months, it would be prudent to enter into a post-nuptial agreement.

Whilst entering into terms of a postnuptial agreement means that the agreement is signed after the wedding, there can be no risk of the agreement being challenged for being concluded too soon before the wedding and potentially being reduced or set aside in the future.

It is also common for parties to enter into terms of a post-nuptial agreement many years after they marry in order to protect money which has been received by one party only, for example by gift or inheritance, particularly where those sums are going to be used to purchase an asset which will become matrimonial property e.g. heritable property. It may be that the parties already had a pre-nuptial agreement but it is not necessary for an existing agreement to be in place for parties to enter into a post-nuptial agreement.

It is important to remember that a post-nuptial agreement will be drafted in line with the circumstances of the parties at the time of drafting. It is an agreement which may or may not be required. It cannot provide for every eventuality. It is therefore important for parties to consider any material change of circumstances in the future and whether their existing post-nuptial agreement adequately protects the change. It can sometimes be necessary to enter into terms of a supplementary post-nuptial agreement.

A post-nuptial agreement drafted in Scotland, by a solicitor qualified in Scots Law, can only be drafted in line with Scots Law. In the event that either party to a post-nuptial agreement holds assets in another country, advice must be sought from a solicitor qualified in the law of that country. This would also apply to the situation where the parties move to another country and as a result, another jurisdiction during marriage.

Making post-nuptial agreements binding

Legal Requirements

It is a common misconception that post-nuptial agreements are not legally binding. A post-nuptial agreement is a contract entered into between two parties and where those parties have had specialist family law advice, with the agreement properly drafted to protect against potential challenge in the future, it is a legally binding document.

Challenges and Enforceability

Challenges to post-nuptial agreements are rare. However, that is not to say that a post-nuptial agreement could not potentially be open to challenge in the future. The family law legislation does contain provision for an agreement entered into, such as a post-nuptial agreement, to be challenged by either being reduced or set aside.

In order to significantly minimise the risk of a post-nuptial agreement being challenged, reduced or set aside in the future, it is crucial to seek specialist family law advice. The risk of an agreement being open to challenge on separation, where specialist family law advice has not been sought, is significantly greater than where parties have both had the benefit of advice.

Conclusions

A post-nuptial agreement is an important option to parties where advice has been sought too close to a wedding where those parties wished to enter into terms of pre-nuptial agreement. It is also hugely beneficial where a party to a marriage comes into money during the marriage, perhaps from gift, compensation or inheritance and that party wishes to protect the money in the event of separation particularly where the money is converted into an asset which forms part of the matrimonial property.

Whilst the family law legislation does provide an option for parties to argue about the source of funds used to purchase an asset forming part of the matrimonial property, these arguments are discretionary and can prove tricky to argue with no guarantee that a Court will exclude every part of the non-marital property.

It is vital to seek specialist family law advice if you are considering entering into terms of a post-nuptial agreement. A post-nuptial agreement is a complex document which should not be drafted by an individual with no knowledge of family law.