A guide to protecting your financial assets when you are the wealthier partner in your relationship
Love is fabulous but, it can also cause even the most conservative amongst us to throw caution to the wind, and risk everything we have worked so hard for.
Few of us enter in to a romantic and financial commitment with the view that it might end. There are a myriad of reasons as to why you would not want anything formalised to protect yourself financially and indeed they may be sound to you.
You are sure your partner is decent and would never behave badly or in a punitive manner. To even raise this would no doubt upset them and why go through that when you trust them? Surely there is no need if the assets are in your name alone or your parents put money in to a property, and isn’t it true that what’s yours is yours alone?
In any event, who needs lawyers when they just cost a load of your hard-earned cash and will look to create trouble. So best just leave things be and see how it goes… right?
Wrong, it’s just not that simple! Let’s start with busting some myths and then look to see what you can do to minimise your risk of having to make an appointment with a solicitor once it has all gone wrong and there was nothing in place upon which you can seek to rely.
The following three scenarios are based on a couple with no children. Let me know if you have other queries or want me to explain what happens when children are born in these situations.
Scenario 1: You live with your partner and the property is in your name
If you’re not married and your partner’s name is not on the property deed, surely your assets are safe? The starting point is that yes, this is right. However, the partner can bring a claim against the family home if they can show they have contributed towards the property such as making mortgage payments or for example contributed towards the fabric of a property such as fitting a kitchen.
If they can show something concrete, there is a prima facie case for an interest in the property. There is even a possibility of your partner claiming they have a right to be there even if they did not contribute, if they can successfully run an argument that you always said what’s mine is yours; you will always have this as your home or words to that effect.
They need to show that you made that assurance and they relied on this promise to their detriment. If you want to google it, look at proprietary estoppel (PE). PE is a hard case to run but why have that door open when it can be firmly closed?
The argument is that although you hold the legal title, the beneficial interest in the property (so where the equity is) should not be yours alone indeed it would be unconscionable for you to deny them their interest.
What’s the solution?
The answer is a cohabitation deed. Look at it as an insurance policy. It goes beyond the basics of saying hands off but goes on to consider other matters you might not have thought about such as the paying of bills.
Will it be a joint account and if so, how much are you each depositing? If you pay in 60% and your partner 40%, what happens if you split? Is it divided in the same proportions? You can address gifts and how they might be split, consider the distribution of debt or even, if you are supporting your partner financially, if this should continue post break up.
It sets out in black and white the intention of both parties so there can be no argument to run of a misunderstanding. If each of you takes independent legal advice, a court will want to know why it should not be upheld. It is a powerful incentive to stop proceedings and if they are issued, to seek your costs.
Much as with writing a will, it is not a good idea to do a DIY version. There is as much you will not think about to include in the deed, as you will have considered, and an omission could cost you dearly.
Scenario 2: You’re married but your assets are all in your name
You are not safe in this scenario either. The court will start with a presumption of fairness. Once you are divorcing, it all gets thrown in to what we call the matrimonial pot. You don’t want that presumption of it all being up for grabs- you want to start with the presumption of your assets remaining yours.
A spouse not only has a claim on liquid assets such as cash and on your income but also on capital and your pension.
Obviously, an argument can be made to depart from equality but why start on the back foot? Property can be treated as matrimonial even if it was pre acquired namely, prior to the marriage (including pension contributions from before you even met), a fact often not appreciated.
What’s the solution?
A prenuptial agreement or more colloquially a prenup is not just for the rich and famous. It considers provision which must be fair so a court will endorse it. If it is manifestly unfair, the court quite simply, will not. It must make proper provision and be revised if it is to have any effect.
We recommend this happens every five years/ after the birth of a child/ other significant events. If you have both had proper legal advice, not been coerced, had enough time to consider it, made each other aware of the extent of your assets and had the opportunity to ask about them.
The court will most likely start with the question as to why it should not be upheld. Nothing is watertight- that’s impossible but it is a very persuasive argument and an uphill battle to depart from it.
Scenario 3: Your parents have put money into your property but it’s in your name only
Again (a theme is starting to run here) it’s not that simple. If it is in your name alone then the court will take that at face value. Your spouse will argue it was a gift and so effectively yours in the first instance but now you are married, it falls in to the pot.
If your parents want to argue it was a loan and they expected it back, the news is that the courts and legal teams are on to this one. When you purchase a house with a mortgage, (almost always – do your own research please) you need to confirm that there are no other loans for this property.
If you try to run a loan argument, the court will suggest you have defrauded the mortgage company. Its not attractive. So how do you keep that money locked away?
What’s the solution?
The answer here is a trust deed. Your parents may say the legal title is yours, but they own for example 10% of the equity. A deed is drafted to say this. It is lodged at the land registry. It makes it extremely difficult to go behind. Your belt and braces, is to get your partner in the cohabitation deed/ your spouse to be in the pre nup, to acknowledge this.
Get legal advice to protect your assets and money
These three scenarios are the tip of the iceberg. It is well worth speaking with a solicitor about options and what works best for you.
Joanna Abrahams is a Director at Valemus Law, an exceptional law firm who provide flexible, legal solutions to a wide range of clients – from global organisations to entrepreneurial start-ups and private individuals,.