Noel Ferry : Wisdom of prenups is based on centuries of experience

“Historically, the reason that prenuptials were put in place in Scotland was that women had little rights to the joint property once they married. The husband assumed ownership of their property upon marriage so it was wise for her and her family to make provision for her in advance as she would be destitute if they separated or he died and his family wanted the property,” he says.

The rise of the prenuptial

Ironically, he adds, prenuptial arrangements have become more visible in recent years through the media, with high-profile celebrity examples. “England has started to catch up with Scotland and most of the rest of Europe in terms of prenuptial agreements. While they have been more common here it’s only recently that in England the Courts have started  to give significant weight to the prenuptial agreement when deciding what the financial settlement should be – previously they weren’t accepted as appropriate in England at all and that was out of line with most European countries.

The Family Law (Scotland) Act 2006 brought in rights for cohabitants. At the same time, the periods of separation required before one could divorce reduced from five year to two years for a non-consensual divorce and from two to one year for a consent-based divorce. Due to the change, we saw a spike in the number of divorces, but this has since reduced. “There are still the same number of relationships breaking down but fewer people are now getting married and divorcing, with more of them cohabiting,” explains Ferry.

“There was also a trend that saw fewer people getting divorced immediately after the financial crisis of 2008 because of the financial insecurity involved in times of recession. There was definitely a slowdown, but the situation now is back on the same footing as before.”

Prenuptials arrangements, of course, represent an important method of obviating much of the tension that divorce inevitably involves. “In Scotland, with a prenuptial agreement where the parties are contracted out of certain claims against each other, the court can only subsequently vary it if it was ‘not fair and reasonable’ at the time it was entered into,” he says.

“It’s like any other contract and if it’s worded properly and the people have had legal advice at the time, individual adults have the right to enter into whatever contract they like.”

Take best advice

Ferry frequently gives advice to clients who intend to marry and those who plan to cohabit. “If the parties are going to cohabit, I explain how the new Law affects that relationship. How it could affect them financially, what kind of claims might arise and what the presumptions are in terms of ownership of assets.

“I explain what the position is regarding what they already own and ask whether they want to share their resources and their obligations to pay for things within the relationship going forward– for example, how they presently deal with their wealth and whether they want to keep their finances separate.”

The cohabitation agreement is then tailored to each couple’s individual circumstances; some might want to provide to provide provision for the other, some to provide provision for schooling for children and because the legislation doesn’t provide for the same level of settlement at the end of a relationship as a divorce it tends to be a much more straightforward agreement to prepare.

Attention to detail

With prenuptial agreements, he says, specific care and attention is given to explaining how marriage will change a couple’s status and how that might affect them financially on separation or death. They then discuss what property is or is not likely to be part of the matrimonial shared assets.

“For example, are they aware that if they convert assets acquired prior to marriage into another type of asset during the marriage they can inadvertently create matrimonial property? Many people who have built up their own wealth prior to marriage don’t expect that to happen and don’t want it to happen.” Hence a prenuptial agreement can be put in place to avoid that.

Prenuptials, he adds, means that there is no need for argument at a later stage if, say, there are changed circumstances surrounding money or property acquired before marriage such as a flat that was preowned or gifted to one of the parties by parents. “The prenuptial agreement ring fences such assets in a way that avoids subsequent disputes,” he says.

This type of situation, he adds, arises very commonly: “You frequently have parents who pay for the deposit on a house before the marriage and if they do that without any specific loan agreement – even though the money may have been intended for the individual son or daughter only – in law it might subsequently be assumed that it is part of the joint marital property, which can be a source of much dissent when parties split up and argue about their entitlement to that money.

“With a prenuptial you can regulate that very easily and indicate that money coming from inheritances, gifts and third parties will not be treated as part of the matrimonial pot even if converted – and similarly with companies or shares acquired before marriage.”

Approaching a family lawyer to make a prenuptial agreement doesn’t necessarily sound like the most romantic way to embark on married life but Ferry emphasises: “Prenuptials don’t have to kill the romance of marriage. They represent sensible planning to avoid later disputes and they do show that the couple are going into it with their eyes open – and if things don’t work out as well as expected, it ensures a simpler and much less acrimonious separation.”

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