Post-nuptial agreements: why it’s never too late to protect your wealth

Nowadays most people will be aware, at least to some extent, of the existence pre-nuptial agreements and what they are designed to do. 

Essentially, a pre-nuptial agreement is contract between a couple who intend to marry or enter into a civil partnership and is used to protect assets or wealth in the event of a separation. But what happens if a couple have already married and a need arises to protect assets, or perhaps just to revisit their financial arrangements more generally? Is the opportunity lost once the wedding celebrations are over?

Fortunately, as the saying goes, it’s never too late to take steps to try to future-proof your finances. A post-nuptial agreement can provide an equally effective way for couples to seek to protect their wealth and to make plans for their financial landscape in the event of a divorce or dissolution.

What is a post-nuptial agreement?

Broadly speaking, the only difference between and a pre-nuptial agreement and a post-nuptial one is timing. A couple can enter into a post-nuptial agreement at any time following a marriage or civil partnership. A post-nuptial agreement serves entirely the same purpose as a pre-nuptial one, and is very similar in terms of format and content. A key advantage of a post nuptial agreement is that it can be used to deal with specific financial events or asset purchases, which parties may not have anticipated earlier in their relationship.

Are post-nuptial agreements legally binding?

In Scotland, both pre-nuptial and post-nuptial agreements are generally considered to be legally binding contracts which can only be challenged in limited circumstances. Provided that the agreement was fair and reasonable at the time it was entered into, both parties have adequate time to consider and get advice about the agreement, and neither party was pressured by the other into signing, it is likely that the agreement will be upheld.

In addition, the Family Law (Scotland) Act 1985 – the legislation that provides the framework for dealing with financial matters on divorce and dissolution – enables the court to take into account “the terms of any agreement entered into between the parties to the marriage or civil partnership”. So, anyone entering into a pre-nuptial or post nuptial agreement should expect to be bound by it. For that reason, it is extremely important that specialist legal advice is sought about the terms of any proposed pre-nuptial agreement and the legal consequences it may have.

When might a post-nuptial agreement be desirable?

There are various situations in which spouses or civil partners may wish to consider a pre-nuptial agreement. Some examples include:

• Inheritance or gifts: One or both parties may receive a significant inheritance or gift during the marriage and wish to ring-fence it from future claims.
  
  
• Business restructuring: Corporate advice to restructure a business or re-distribute shares may give rise to unintended family law consequences. A post-nuptial agreement can be used to ensure that a pre-marital business interest remains separate from a couple’s matrimonial or partnership property.
  
  
• Time constraints before the wedding: As a general rule, a pre-nuptial agreement should not be concluded on the eve of the wedding, and both parties should be afforded sufficient time to reflect and seek advice otherwise the agreement could be susceptible to challenge. If that’s not possible, a post-nuptial agreement may be a more robust solution.
  
  
• International relocation: A change in domicile or tax residency can trigger the need to reassess financial arrangements.
  
  
• Other changes in circumstances: It’s highly unlikely that a couple’s financial position will remain unchanged throughout their marriage or civil partnership, particularly for couples whose relationship begins in their 20s or 30s. Add in other life events, and couples may decide to make specific provision to protect certain assets or provide for division of their wealth. A post-nuptial agreement enables them to do that in a way which might differ from the provisions of the 1985 Act in the event that their relationship does break down.

Cross border considerations

The need for planning and certainty can be of even greater significance if a couple has an international connection or owns assets situated outside of Scotland. In those circumstances, a couple may wish to stipulate within a post nuptial agreement which country will have jurisdiction in the event of any future separation, and as such which country's laws will apply to financial provision on divorce or dissolution. It must, however ,be borne in mind that such provisions will not always be recognised in every country. That being said, in the event of a dispute, the fact that a jurisdiction clause has been included may well be helpful and may carry some weight with the court.

Attitudes to pre and post nuptial agreements vary significantly in other jurisdictions, so where there is an international connection it is always advisable to seek the input of a specialist family lawyer in the other jurisdiction too, so to provide clarity about whether the terms of any Scottish agreement are likely to be enforceable there. Additionally, it may be necessary to arrange for a “mirror agreement” or similar legal provision to be put in place in the other jurisdiction to replicate the arrangements the couple wishes to be given effect to in the event of a separation.

Should you require any advice in connection with protecting your wealth pre-marriage or during marriage, please get in touch with one of our family law experts.