UK legal filter: keeping assets safe from potential divorce
May 28, 2019 11:18 PM Subscribe
You are not my lawyer and I'm getting one, but is it even possible in the UK to protect a large inheritance I received last year (and the house I'm about to buy with it) from my husband having any rights to the funds if we divorce? If so, what is this called in the UK so I know what to ask my lawyer about. My husband agrees to this money and property belonging to me. The inheritance came from dead relatives outside the UK, if that is pertinent. Thank you!
In Australia I believe that this type of agreement is called a "binding financial agreement" and in the United States this might be covered under a post-nuptual agreement but I am having trouble finding out what the UK term is.
I think that your lawyer would definitely be able to work out what you need, as long as you explain that you need to come up with a legally binding agreement which will protect the assets you have inherited since marrying.
posted by kinddieserzeit at 12:09 AM on May 29, 2019
I think that your lawyer would definitely be able to work out what you need, as long as you explain that you need to come up with a legally binding agreement which will protect the assets you have inherited since marrying.
posted by kinddieserzeit at 12:09 AM on May 29, 2019
Working with terminology translation resources for this concept in my language seems to offer up the following key concepts of “separate estates” and “in ones own right” as well as “not included in community assets”.
separate property during marriage, to possess something in one's own right
Hope that helps somewhat in your searches. Interestingly the wiki page doesn’t exist in English but in German, French, Italian, Swedish and Norwegian.
posted by J.R. Hartley at 2:16 AM on May 29, 2019
separate property during marriage, to possess something in one's own right
Hope that helps somewhat in your searches. Interestingly the wiki page doesn’t exist in English but in German, French, Italian, Swedish and Norwegian.
posted by J.R. Hartley at 2:16 AM on May 29, 2019
is it even possible in the UK to protect a large inheritance I received last year (and the house I'm about to buy with it) from my husband having any rights to the funds if we divorce
You really need to get advice from a family lawyer, but my understanding is that the basic position is that while, at the very least, premarital agreements (recognise the position is somewhat different here) may be considered in proceedings for ancillary relief (post Radmacher v Granatino I think? Spelling may be off), the court will still have the power to divide marital assets as it sees fit. The starting point is, as I understand it, still a 50/50 split.
It seems possible that you may need to set up a trust to achieve your goal, so it might be worth also seeking estate planning/private client advice. Speak to a family lawyer who does ancillary relief work, together, and then consider further steps, I think.
posted by howfar at 2:43 AM on May 29, 2019
You really need to get advice from a family lawyer, but my understanding is that the basic position is that while, at the very least, premarital agreements (recognise the position is somewhat different here) may be considered in proceedings for ancillary relief (post Radmacher v Granatino I think? Spelling may be off), the court will still have the power to divide marital assets as it sees fit. The starting point is, as I understand it, still a 50/50 split.
It seems possible that you may need to set up a trust to achieve your goal, so it might be worth also seeking estate planning/private client advice. Speak to a family lawyer who does ancillary relief work, together, and then consider further steps, I think.
posted by howfar at 2:43 AM on May 29, 2019
I am a lawyer practising family and divorce law in England. I am not your lawyer and this is not formal legal advice to you, but it is my explanation based on several years of dealing with cases like this.
In the event of divorce, if the two parties cannot agree a settlement then there is no formulaic rule, but rather the court applies the factors set out at section 25 of the Matrimonial Causes Act 1973 (helpful explanation here). In effect, the court tries to satisfy the needs of the parties and any children, with reference to each party's assets and income. The 'matrimonial pot' is taken as the pooled assets of the parties, and the onus is on a party to show why any particular asset should be 'ring-fenced', i.e. excluded from the pool available for division. A substantial inheritance might in some circumstances be excluded, but if it happened during the marriage (where there is taken to be an assumption that income and assets are shared) this can be harder to prove.
However, as Howfar has noted, English law now gives weight to pre-nuptial (and indeed post-nuptial) agreements thanks to the decision of the Supreme Court in Radmacher v Granatino. The UKSC held that although a couple cannot oust the jurisdiction of the Matrimonial Causes Act, a suitable agreement will be taken as a significant, and potentially compelling, factor alongside the other s.25 factors. So long as it does not leave minor children unprovided for, or consign one party to utter poverty, a reasonable agreement will be upheld.
So what makes a reasonable agreement? The key issue is that both parties must appreciate what the matrimonial assets are, and what the effect of the agreement will be. So, if one party conceals assets, that would make an agreement weak or void. Equally, if one party takes advantage of another's lack of understanding of the effects of an agreement, that would undermine it. However, if both parties have had proper legal advice then it will be difficult to avoid such an agreement.
What I would suggest to someone in your position is for you and your husband to have a suitable agreement drawn up by a family solicitor and then, if you want to make really sure that it is watertight, for your husband to take independent advice from another family solicitor confirming he understands the implications of the agreement (as he is the one who one the face of it is coming out worse by it). That solicitor should provide your husband with a letter confirming that your husband understands the agreement, and your husband should give you a copy of that letter. This is a belt-and-braces approach and possibly overkill, but your husband (or someone acting on his behalf if, for example, he were to lose mental capacity) would find it very hard to say that such an agreement did not have a strong effect on the outcome of a divorce.
One final point: my honest thanks to you and your husband for talking about this and planning for it. No married couple likes to plan for divorce, but where there are difficult and potentially complicated issues like this, it is a very prudent thing to do.
posted by Major Clanger at 10:02 AM on May 29, 2019 [10 favorites]
In the event of divorce, if the two parties cannot agree a settlement then there is no formulaic rule, but rather the court applies the factors set out at section 25 of the Matrimonial Causes Act 1973 (helpful explanation here). In effect, the court tries to satisfy the needs of the parties and any children, with reference to each party's assets and income. The 'matrimonial pot' is taken as the pooled assets of the parties, and the onus is on a party to show why any particular asset should be 'ring-fenced', i.e. excluded from the pool available for division. A substantial inheritance might in some circumstances be excluded, but if it happened during the marriage (where there is taken to be an assumption that income and assets are shared) this can be harder to prove.
However, as Howfar has noted, English law now gives weight to pre-nuptial (and indeed post-nuptial) agreements thanks to the decision of the Supreme Court in Radmacher v Granatino. The UKSC held that although a couple cannot oust the jurisdiction of the Matrimonial Causes Act, a suitable agreement will be taken as a significant, and potentially compelling, factor alongside the other s.25 factors. So long as it does not leave minor children unprovided for, or consign one party to utter poverty, a reasonable agreement will be upheld.
So what makes a reasonable agreement? The key issue is that both parties must appreciate what the matrimonial assets are, and what the effect of the agreement will be. So, if one party conceals assets, that would make an agreement weak or void. Equally, if one party takes advantage of another's lack of understanding of the effects of an agreement, that would undermine it. However, if both parties have had proper legal advice then it will be difficult to avoid such an agreement.
What I would suggest to someone in your position is for you and your husband to have a suitable agreement drawn up by a family solicitor and then, if you want to make really sure that it is watertight, for your husband to take independent advice from another family solicitor confirming he understands the implications of the agreement (as he is the one who one the face of it is coming out worse by it). That solicitor should provide your husband with a letter confirming that your husband understands the agreement, and your husband should give you a copy of that letter. This is a belt-and-braces approach and possibly overkill, but your husband (or someone acting on his behalf if, for example, he were to lose mental capacity) would find it very hard to say that such an agreement did not have a strong effect on the outcome of a divorce.
One final point: my honest thanks to you and your husband for talking about this and planning for it. No married couple likes to plan for divorce, but where there are difficult and potentially complicated issues like this, it is a very prudent thing to do.
posted by Major Clanger at 10:02 AM on May 29, 2019 [10 favorites]
Anecdotally, when two family members of mine in England and Wales divorced one party had recently received a substantial inheritance and that was successfully kept out of the marital pot. So it is possible. In their case, the marital pot was big enough (and both parties were employment) that they could still both afford to buy smaller properties and enjoy comparable standards of living, and it was the lower income party who inherited.
Also in case it's relevant, there are different legal jurisdictions in the UK. The situation in Northern Ireland appears to be similar to England and Wales. But, there are different rules for divorce in Scotland, this article suggests that the position of a post-nup ('marriage contract' in Scots law) is slightly stronger than in England and Wales, the important thing is that agreement was made under 'fair' circumstances at the time even if it results in unequal shares.
If you went to a lawyer in your jurisdiction and asked about a 'post-nuptial agreement' they should be able to help you work out what you want to do. If there is a reasonable chance that you might move jurisdictions in the future, then that could change the legal position of any agreement you make.
posted by plonkee at 2:16 AM on May 30, 2019
Also in case it's relevant, there are different legal jurisdictions in the UK. The situation in Northern Ireland appears to be similar to England and Wales. But, there are different rules for divorce in Scotland, this article suggests that the position of a post-nup ('marriage contract' in Scots law) is slightly stronger than in England and Wales, the important thing is that agreement was made under 'fair' circumstances at the time even if it results in unequal shares.
If you went to a lawyer in your jurisdiction and asked about a 'post-nuptial agreement' they should be able to help you work out what you want to do. If there is a reasonable chance that you might move jurisdictions in the future, then that could change the legal position of any agreement you make.
posted by plonkee at 2:16 AM on May 30, 2019
Ex-UK family lawyer here. What Major Clanger said.
In the event of a split, although potentially everything is on the table to be divided, unless circumstances have radically changed affecting the needs of one the parties, the courts will have regard to a prior agreement made with full openness and disclosure.
posted by essexjan at 2:13 PM on May 30, 2019
In the event of a split, although potentially everything is on the table to be divided, unless circumstances have radically changed affecting the needs of one the parties, the courts will have regard to a prior agreement made with full openness and disclosure.
posted by essexjan at 2:13 PM on May 30, 2019
I'm a non-lawyer, and in the US, so I'm nowhere near the expert that Major Clanger is. But as general encouragement, I'll tell you that my wife & I had a pre-nuptial agreement (basically "what's his stays his & hers stays hers"), and when we bought a house a few years later we drew up a post-nup that covered more details of asset ownership and how they would split in a divorce. In both situations, she had more assets at the time.
Fast forward 15 years and several shifts of fortune, and the divorce is unfortunately happening. Boy, are we glad we signed those. It's making things so much easier than it would be if we had to do ad hoc decisions about the divisions. Neither of us is out to screw over the other, but having things nailed down in advance keeps even a whiff of that from poisoning what's otherwise a very civil process.
Good for you for talking about this so cooperatively at this stage. Take that momentum and run with it straight to a family lawyer. The fee will buy huge amounts of peace of mind.
posted by NumberSix at 10:08 PM on May 31, 2019
Fast forward 15 years and several shifts of fortune, and the divorce is unfortunately happening. Boy, are we glad we signed those. It's making things so much easier than it would be if we had to do ad hoc decisions about the divisions. Neither of us is out to screw over the other, but having things nailed down in advance keeps even a whiff of that from poisoning what's otherwise a very civil process.
Good for you for talking about this so cooperatively at this stage. Take that momentum and run with it straight to a family lawyer. The fee will buy huge amounts of peace of mind.
posted by NumberSix at 10:08 PM on May 31, 2019
pre-nups with some caveats (do full disclosure, do well in advance of wedding, add clauses to defer to court for change of circumstance) have uncertain effect in the UK. Get one.
If you want to keep the money, DO NOT invest it in your marital home. Buy something else with it, have a mortgage in joint names and joint ownership. That way, when your partner wants to stay there after the divorce, you lose half the equity and they still have to keep paying their half of the mortgage, rather than you being stuck with the 'I never paid rent' argument.
posted by fistynuts at 3:31 PM on June 14, 2019
If you want to keep the money, DO NOT invest it in your marital home. Buy something else with it, have a mortgage in joint names and joint ownership. That way, when your partner wants to stay there after the divorce, you lose half the equity and they still have to keep paying their half of the mortgage, rather than you being stuck with the 'I never paid rent' argument.
posted by fistynuts at 3:31 PM on June 14, 2019
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posted by catspajammies at 11:56 PM on May 28, 2019