What is a prenuptial agreement?

A typical prenuptial agreement is a legal document entered into by both parties prior to marriage. The agreement is used to protect assets owned prior to marriage to ensure that they are ring-fenced in the event of the breakdown of a marriage. It is a sensible way to discuss a couple’s assets and how they may protect their financial interests. The assets can be ring-fenced and provision can be made for what would happen in the event that any of those ring-fenced assets are used during the period of marriage, to obtain further property.

How are assets divided in a prenuptial agreement?

Matrimonial property, for the purposes of separation and divorce, is all property acquired during the period of marriage with the exception of gifts and inherited funds. The relevant legislation applied when couples separate makes provision for the division of matrimonial property on the basis of a fair sharing. The legislation provides guidance and factors to be considered when deciding how a fair sharing of matrimonial property can be achieved. Especially if one partner has significant assets they wish to protect.

Consideration can be given to the source of funds used to obtain matrimonial property, for example, assets which were acquired before marriage being used to obtain assets which are then defined as matrimonial property.

Entering into a prenuptial agreement removes any uncertainty about the division of matrimonial property on separation where assets acquired before marriage are used to acquire assets during the period of marriage. In the absence of a prenuptial agreement, negotiating how the matrimonial property is to be fairly shared can prove trickier where source of funds arguments are advanced, which could lead to financial consequences in the unfortunate event of a relationship breakdown.

A prenuptial agreement can give both parties peace of mind at the outset of their relationship how they wish certain assets to be dealt with in the event of separation rather than dealing with it at a more emotional, difficult time. It significantly minimises the risk of any uncertainty with negotiation and litigation following separation.

It is important to seek independent expert legal advice when entering into a prenuptial agreement to ensure that the agreement is entered into without any undue pressure. This helps ensure the agreement is considered fair and just, in the unfortunate event of a divorce.

Prenuptial agreements – how do they work?

Prenuptial agreements set out how a couple wish certain assets to be dealt with following separation . Specific definitions of assets can be provided and if the intention of the parties is for these assets to be ring-fenced, they can be defined within the prenuptial agreement as ‘separate property’. They commonly make provision for the family home, savings and investments, business interests, inheritance and specific items of value.

In advance of considering what terms are to be included in a prenuptial agreement and how matters are to be determined on breakdown of a relationship, it is important that each partner seeks specialist, independent family law advice.

It is important that consideration is given to the existing legislative framework for dealing with separation and divorce so as to ensure that the prenuptial agreement does not significantly depart from the framework. Any significant departure from the legislative framework could increase the risk of the prenuptial agreement being open to challenge, from a court in the future.

To avoid this, both parties entering into the prenuptial agreement should seek their own separate and independent legal advice. One party’s solicitor will draft the prenuptial agreement with the other party’s solicitor having the opportunity to consider its terms and make any appropriate changes to the agreement to protect the party’s financial interests. When both parties have agreed terms, the prenuptial agreement can be signed.

Are prenuptial agreements legally binding?

A prenuptial agreement is a legally binding written contract entered into in contemplation of marriage. It is important to bear in mind that a prenuptial agreement, or part of the agreement, could be challenged in the future in the event of divorce. There is provision in the family law legislation for agreements to be set aside or varied.

Whilst provision exists for a prenuptial agreement to be challenged, it is important for each partner to seek specialist family law advice before entering into terms of a prenuptial agreement to minimise the risk of the agreement being challenged in the future. Consideration requires to be given to the factors that could deem a prenuptial agreement, or part of a prenuptial agreement, unfair or unreasonable and therefore more at risk of being challenged by a court.

Do prenuptial agreements protect children?

Entering into a prenuptial agreement could make provision for childcare arrangements on breakdown of the marriage . The childcare arrangements could apply to any existing children of the relationship and/or future children of the relationship. However, it is important to be aware that any arrangements narrated in a prenuptial agreement in respect of children are not legally binding or enforceable. The prenuptial agreement can make provision for parties intentions at the time of signing the agreement but any dispute in the future would be determined by considering what is in the best interests of the child/children and their welfare.

Can a prenuptial agreement be overturned?

There is provision in the family law legislation for agreements to be set aside or varied. This means that an agreement could be challenged in court in the event of a divorce.

All or part of an agreement could be open to challenge if the agreement is deemed unfair or unjust. Prenuptial agreements have been deemed to be included within the provision in the family law legislation.

It is important to seek specialist family law advice before entering into terms of a prenuptial agreement to minimise the risk of the agreement being challenged in the future. Courts are reluctant to overturn a legally binding contract entered into between two parties in good faith.

In order to minimise the risk of a prenuptial agreement being overturned by a court, it is crucial that both parties have the opportunity to seek separate and independent family law advice on the terms of the agreement. It is also important that the parties are given a sufficient period of time in advance of the wedding to seek advice and consider the terms of the prenuptial agreement. Seeking advice in a sufficient time period before the wedding will minimise the risk of a party claiming that they were coerced into entering into the agreement and were not given time to properly consider its terms.

Can I draft my own prenuptial agreement?

A prenuptial agreement must be drafted accurately and carefully to ensure that its terms are not going to be open to challenge as being deemed unfair or unreasonable by a court. It is therefore important that specialist family law advice is sought to understand when terms of an agreement could potentially be deemed to be unfair or unreasonable in the event of divorce.

Each partner should seek specialist family law advice in advance of concluding terms of a prenuptial agreement, as this can significantly reduce the risk of the agreement being overturned in the future and avoid protracted court proceedings.

Will my prenuptial agreement be valid outside of Scotland?

Prenuptial agreements serve to avert prolonged discussions and disputes during divorce proceedings, as the distribution of assets has already been predetermined.

However, it is crucial to recognise that a prenuptial agreement entered into between two parties in Scotland can only be valid in terms of Scots law. It is important to be aware that it is not possible to guarantee how the prenuptial agreement will be applied in other jurisdictions. Where other jurisdictions are relevant or may be relevant in the future, it is important to seek advice in that jurisdiction too.

Can a prenuptial agreement be changed after marriage?

It is important to bear in mind that a prenuptial agreement is entered into in contemplation of marriage and can only make provision for what parties aim to achieve, in the event of a relationship breakdown, at the point of entering into the prenuptial agreement. It is not possible to provide for every eventuality.

Parties should consider when a change to the prenuptial agreement may be necessary and ensure that any potential financial issues or updates are incorporated into the existing agreement.

In the event of a material change of circumstance during the marriage, parties may wish to consider reviewing the terms of their prenuptial agreement. It is possible for parties to make changes to an existing prenuptial agreement by entering into terms of a supplementary agreement providing both parties agree to do so.

What is a post nuptial agreement?

It is also possible for parties to enter into terms of a ‘postnuptial agreement’ which is entered into after marriage and can be done whether or not there is an existing prenuptial agreement.

Post nuptial agreements could be entered into by the parties where they are too close to their wedding date to properly have the time to consider terms of a prenuptial agreement but have a vested interest in the need to protect assets after they are married.

Is a prenuptial agreement relevant for Civil Partnerships?

Parties wishing to enter into a Civil Partnership can enter into terms of a pre-civil partnership agreement in the same way as a couple wishing to marry, although Civil Partnerships are less common since the law changed to allow same-sex marriage. The agreement would provide clarity on how assets will be regulated in the event of a relationship breakdown and can safeguard assets acquired before the civil partnership.

Financial outcomes upon the dissolution of civil partnerships follow divorce laws, and the enforceability of pre-civil partnership agreements parallels prenuptial agreements. If both partners enter into the agreement willingly, having sough independent legal advice, it is likely to be upheld.

Prenuptial agreement cost

Please contact our specialist family law team for further advice on the costs of a prenuptial agreement. Costs are determined by the hourly rate of the solicitor instructed by you. We will be able to provide you with an estimate of the cost when we have discussed matters with you as each prenuptial agreement will vary on a case by case basis.

Writing a prenuptial agreement without a solicitor

A prenuptial agreement requires specialist legal advice and input from a family law solicitor. We would not advise that parties attempt to draft their own prenuptial agreement as in doing so, there is a significant risk that upon separation, the agreement could be open to challenge and deemed to be unenforceable, leading to protracted court proceedings.

Contact Harper Macleod Family Team

The team at Harper Macleod have significant experience in drafting, preparing and concluding terms of both prenuptial agreements and postnuptial agreements.

We can provide clear legal advice to ensure that your prenuptial or post nuptial agreement is tailored to your specific needs and requirements.