In Scotland entering into a pre-nuptial agreement is something that is familiar to most people. Post-nuptial agreements less so, as they are often perceived as representing a red flag that there could be dark clouds on the horizon. But let me explain why they are worth considering.
With both types of agreement, we ordinarily look to ring-fence assets already held by individuals when they marry, as well as anything they might receive as a gift or inheritance during the marriage. Scots law already provides a degree of protection to those assets. Our laws provide that pre-marital, gifted or inherited wealth should not be subject to division on divorce.
Where things become less clear is where those categories of assets are altered in some way. That is where a pre-nuptial or post-nuptial agreement can be effective. They are there to reinforce or extend that ring-fencing exercise – if our laws are like a first fence around the paddock, the agreement is the second fence to make certain the horses cannot bolt.
In times of economic instability, this ring-fencing of assets becomes even more important. Why? Because asset growth is usually down to restructuring, re-investment and opportune moves or purchases. How that may impact on someone's personal financial affairs is often forgotten.
For example, if an individual owns shares in a company when they marry, the shares (if they remain unaltered) are not subject to division on divorce. If the company is restructured and new shares issued during the marriage, any new shareholding will become subject to division on divorce.
Post-nuptial agreements are a useful tool to ensure that you cover all angles. Much like a horse, it is most important that they are handled in the right way.
