In Scotland, if a couple divorces, the assets accumulated during the marriage (known as “marital assets”) are divided. The rules are designed to provide a fair distribution of assets that have been accumulated during the marriage. The default position is an equal division of assets, although there may be an unequal division in certain circumstances.
“Marital property” consists of all property acquired by either spouse between the date of the marriage and the date of separation (excluding property acquired by gift or inheritance). Sound fair and simple? Can be. However, there are often complexities. An example is if an asset (for example, a business) existed before the marriage but changed form in some way during the course of the marriage. This could result in the formation of marital property. Another example might be where a party to the marriage inherits property during the marriage (for example, a lump sum), but it changes form (for example, if it is used to acquire property) and becomes marital property. So what can be done?
In cases where there are complexities, and disagreements between the parties, regarding the division of property, the case may be taken to court and a bailiff or judge may use their discretion to make a decision as to what is a fair division of property. the goods. This is a process that can be very expensive, time-consuming, and stressful, not to mention that it can result in an outcome that neither party is happy with. So how is this avoided?
Proactive asset consideration, planning and protection (before and during the marriage) is the answer. Most couples don’t want to think about the possibility of divorce when they get engaged (or even during the marriage), but divorce does happen. There is planning that can be done to help the parties achieve a quick, fair and equitable division of assets, and prevent things from getting messy if they ever get divorced.
Prenuptial and postnuptial agreements are one of the planning tools. Married couples can enter into contracts before (a “prenuptial”) or during (a “postnuptial”) a marriage. These contracts provide for what they want to happen to certain assets in the event of a martial breakup. These contracts are a really effective, if unromantic, planning tool. I like to think of agreements as marriage insurance policies. It is not expected to be necessary, but it is there just in case (like home or travel insurance).
However, for many couples, entering into such an agreement before marriage is too emotionally difficult or they consider it unnecessary at the time due to their asset position. In such cases, it is worth bearing in mind that you can enter into a postnuptial contract at any time after the marriage has taken place. So if things change, consider seeking advice, especially if a major financial decision or change is in the works. A business restructuring may be a once such occasion. Another might be in one of the parties you should inherit and you want to protect the inheritance.
Another less formal planning tool is to work with a family attorney along with your other financial planners during the course of your marriage. Professional financial advisors, such as accountants, tax advisors, and corporate attorneys, can inadvertently cause problems in the future. What could be a tax-efficient decision now could be a disadvantage for you at the time of divorce. Having a family attorney on the planning team could help avoid a costly trap.
The final planning tool is used at the split point. If you break up and haven’t planned on it during the marriage, all is not lost. Consult an experienced family lawyer at an early stage. Be truthful and make a full and complete disclosure of your assets. This information will allow your family attorney to seek a negotiated division of assets that is favorable to you and that best preserves and protects your assets for the future.
Anna Maitles is Senior Attorney, Morton Fraser
George Holan is chief editor at Plainsmen Post and has articles published in many notable publications in the last decade.