The prenup is on the rise in Scotland, particularly among business owners and those entering second marriages
Kathy was on a girls’ getaway when she met Stuart on holiday in Ibiza. They were both divorced and they hit it off. When they returned to Scotland, they started dating and love bloomed. Kathy, who has two teenagers, lives in East Kilbride, while Stuart, who has a daughter and son, both at university, is from Bellshill.
“We decided to move in together and set up home. It’s been fantastic. We’re planning to get married in Ayrshire in the spring next year. It’s been recommended that we sign a prenuptial agreement, so both sets of children know the score,” says Kathy.
Stuart fully agrees. “I really think being up-front about all of this, and acknowledging our past relationships and our future responsibility, it’s a very sensible move. We’re both very happy with this.”
The common misconception that prenuptial agreements are solely the preserve of technology billionaires, royalty, A-list celebrities is now way off the mark.
Although often associated with high-net-worth individuals, many couples could benefit from pre or postnuptial agreements, including entrepreneurs, people in professional or other partnerships, people wishing to protect children’s interests from a previous relationship and couples where there is a wealth imbalance between the parties.
According to Caroline Gillespie, partner at Weightmans, a growing group of clients is parents gifting monies to offspring – often to help them gain a foothold on the housing ladder – as part of their inheritance tax planning.
“With all the budget changes, people are looking to manage their assets and potential tax liabilities,” she says.
Jenny Smith, partner at Harper Macleod, suggests that the growth in prenups can partly be explained by the fact that lawyers in other disciplines, such as conveyancing and corporate law, as well as other professionals such as accountants and financial advisers, are becoming more alert to the potential benefits for clients.
“A wealthy business owner might inform his corporate lawyer that he wants to gift shares in a company to his children as part of a tax planning process and his corporate lawyer might well suggest that his children seek family law advice, including prenups, postnups and cohabitation agreements,” she says.
Given that prenups ringfence assets, there are a myriad reasons for people involved in running or owning their own business to put this protection in place because a business will often change form over the course of its lifecycle.
“Company shares may change hands, family members and spouses may come into the business, and prenups can protect for all those changes,” says Gillian Crandles, managing partner, Turcan Connell.
“Without an agreement, if you have shares in company A that you then exchange for shares in company B, while the law would give protection to the original shareholding, if the new shareholding is acquired during the marriage, that would be regarded as matrimonial property.
“But with a prenup agreement you could extend the existing protection of the law to anything you acquire from that source.”
Crandles highlights the situation of when family businesses pass down to different generations as a common prompt for prenups.
“Perhaps mum and dad have started the business, their grown-up children are coming into the business and it is at that point that the elder generation want to pass on their wealth to their offspring but wish to make sure that it stays within the family so that in the event of a marital breakdown the business assets are protected,” she says.
Smith agrees that prenups can be a useful tool for shareholders.
“A shareholding may not be particularly valuable at the time of marriage but, over the course of a long marriage, it can become worth millions of pounds, and getting valuations for shareholdings is one of the biggest issues we face as family lawyers,” she says.
Gillespie notes that prenups are not automatically binding in England and Wales, but the courts are likely to uphold them if they meet certain legal requirements whereas in Scotland they are treated as contracts which are legally enforceable, provided they are prepared and signed properly.
Which is why no family lawyer worth their salt would recommend an off-the-shelf prenuptial agreement.
“It is not unusual for a client to want answers on a postcard, or to enquire if it is possible to get a one-page prenup document, and sadly the answer is no because they are all bespoke,” says Crandles.
“There might be some common features, but each prenup has to be modified to achieve what each person wants.”
Smith agrees that no-one should ever try and do an off-the-shelf agreement without having a lawyer look at it first.
“I’m sure if you looked on AI you would be able to get a prenuptial agreement, but I would not recommend doing that,” she cautions.
“The risk is that you pick a template that is not Scottish and you might not understand exactly what the rights and obligations are that you are either giving up, if you are the less wealthy person, or that you’re seeking to impose, and the risk is that at a later date the agreement could be found to be unreasonable and unfair at the time it was entered into,” Smith says.
“If you have substantial assets you want a prenup to be enforceable, so you really want to do it properly,” adds Gillespie, who advises anyone considering a prenup to give themselves time and to do so collaboratively with the other party.
Crandles acknowledges that there remains some sensitivity around prenups, but suggests that people are getting better at having these discussions at an earlier stage and deciding what is it they want for their own lives.
“In most cases it can be a relatively productive dialogue – there’s the odd one that goes awry because somebody wants it and the other party isn’t on board – but most of the time you can have a grown-up conversation.”
Why Jane and Hamish were happy to sign on the dotted line
Jane, 45, lives in Stirling and met Hamish, 47, from Edinburgh on a ‘professionals’ dating site. Rather than a fling, they soon realised that this was the real thing.
Both were previously married, and each have two children of school age. They’ve been together for five years now and plan to get married next May.
Both have successful careers: Jane has a senior managerial role in a telecoms company while Hamish is a partner in a chartered surveying firm, and Jane’s second response to Hamish’s marriage proposal (after saying ‘yes’) was to add the proviso that they agree to a prenup to protect both their interests and those of their children.
It was a proviso that Hamish was only too willing to accept.
Jane and Hamish are by no means unusual by agreeing to draw up a prenup.
According to Caroline Gillespie at Weightmans, the increasing popularity of such agreements can be attributed partly to people entering into second or subsequent marriages with prenups being more prevalent when people have built up wealth before marriage.
Nor are they unusual in having a straightforward discussion about how best to protect their assets as part of their wedding plans.
As Gillian Crandles, at Turcan Connell, points out, it is advisable for couples to have an open and frank discussion about how best to protect their assets sooner than later so that both parties are in agreement well in advance of the big day – which they can then enjoy without the prospect of any niggling financial uncertainties clouding the enjoyment of their wedding.
