Family law specialist Sarah Crilly supports the need for pre-nuptial agreements and discusses added protection for parents who may fund their children's marital home purchase.
Recent statistics tell us that nearly 50% of marriages end in divorce. On average a marriage in Britain lasts only 11 years. For second marriages these tend to end within the first five years.
Nearly two-thirds of those divorces now end with the family wealth evenly split between husband and wife. Equality has become the guiding principle for settlement, even more so where there are significant assets involved.
However, if you are embarking on marriage for the first or even second time and have either inherited or been gifted property from family members or have acquired your own property portfolio before even meeting your spouse, consideration must be given to what you wish to happen if you later divorced.
Whilst these types of property would be classed as non-matrimonial assets it does not give a party complete protection. Such assets are not automatically ring-fenced. The only way of affording yourself the greatest protection is to enter into a pre-nuptial agreement which is a contract entered into by a couple prior to marriage which sets out how they intend to regulate their financial positions in the event of a divorce.
Rather than leave the division to the court, a prenuptial agreement will give the parties certainty and is a sensible form of wealth protection.
Although they are not automatically binding on the court, provided it is entered into fairly and both parties have had the opportunity to consult a lawyer before signing it, there is no injustice if the pre-nuptial agreement is followed. The Supreme Court has ruled that they should be upheld and only departed from in limited circumstances.
Pre-nuptial agreements benefit anyone with assets that need to be divided after a divorce.
For instance, in cases where parents may have advanced funds to help with the purchase of the newly-weds’ matrimonial home, this can be recorded in any agreement. Additionally a parent could become a joint legal owner with their child and also any co-owner if there is one.
Shares would then be set out in a Trust Deed detailing the contribution and how much is due back from any net proceeds on sale. However, if the property is being purchased with the benefit of a mortgage this would mean that the parent would be jointly and severally liable for the payments due under the terms of any mortgage but this arrangement would have to be disclosed to the mortgage company who may raise queries.
Another option is to take out a charge on the property which would rank after the mortgage and would require the owners to repay the deposit on sale of the property from the proceeds of sale after they have paid the selling costs and repaid the mortgage. The downside of this arrangement is that there is no guarantee of getting all monies back if the value of the property falls and/or the terms of the first mortgage allow linked loan accounts or further draw-downs on the mortgage which may eat into the equity in the property.
If you simply want your child to have the deposit monies and not have to share those in the event they purchase a property with a partner and that relationship breaks down, then your child should enter into a Trust Deed with the co-owner. Again this would set out the value in the property which each co-owner would be entitled to when the property is sold.
Of course there are cases where one or both parties are in business and this can bring additional complexities to the case or their affairs may be tied up with a Trust or Farm but all couples can benefit from a pre-nuptial agreement. Couples do end up in court on some of the most uncomplicated cases where they may just be arguing over the split of equity in a house. They still have to fund the costs of the court proceedings and the stresses of litigation are exactly the same no matter how simple or complex their assets. At Ward Hadaway, we have experience of dealing with pre-nuptial agreements and can provide couples with advice on any issues they might have.
For more information on the issues raised in this article, please contact sarah.crilly@wardhadaway.com or call 0191 204 4463.
