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Legal Blog - Protecting Business Assets on Divorce

Mon, 2015-03-30 10:47

The most contentious and costly divorce actions in Scotland often involve changes to the structure of business assets, usually to take advantage of tax savings, resulting in unintended consequences for matrimonial purposes. 

“Matrimonial Property” comprises all assets acquired from the date of marriage to the date of separation, with the exception of any assets received by way of gift or inheritance from a third party. Any asset owned pre-marriage, or received by way of gift or inheritance during the course of the marriage, will therefore not form part of the matrimonial property available for “fair” division on divorce, provided that the asset remains in the same form as at the date of separation. 

By way of example, a couple set up and run a successful family business. They make their son a partner in the business by gifting him an interest and together they continue to run the business as a partnership. The son’s partnership interest would not form part of the matrimonial property in the event of any separation from his wife. 

By contrast, if the family decided to incorporate after gifting their son an interest in the partnership, this change in form could be enough to make the son’s shares in the newly incorporated company matrimonial property. This unintended consequence could be avoided by the son entering into a pre-nuptial or post-nuptial agreement to protect his partnership interest, and anything deriving therefrom, from a claim on divorce.  

Claire Christie 

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