One of the most common concerns when couples contemplate marriage, and which are often shared by parents who may be considering gifting to their children, is how they can safeguard assets they have inherited or accumulated from their own endeavours prior to the marriage. They may also wonder what will happen if things don’t work out; how will the division of their assets be decided?

In this article, we address our most frequently asked questions:

A. How can I safeguard my assets before I marry, if I were to divorce in the future?
B. What happens if it all goes wrong?

A. HOW TO SAFEGUARD YOUR ASSETS IN DIVORCE

1. Pre-Nuptial Agreements

Although not infallible, these agreements carry significant weight in English courts and provide a documented framework for asset division. A thoroughly drafted pre-nuptial agreement that meets the relevant criteria can be instrumental in preserving financial interests during divorce proceedings.

2. Declarations of Trust

These documents can record beneficial ownership interests of third parties (e.g. parents) especially in circumstances where there may otherwise be ambiguity in determining the real ownership of an asset. If prepared in a timely manner, declarations of trust can help to eliminate doubt and clearly define each party’s share. They are also helpful for couples who intend to cohabit in a property that they have bought together but may not have contributed to the purchase in equal shares. 

3. Loan Agreements

A well-crafted loan agreement prepared prior to any sums being lent not only outlines repayment terms but also serves as a legal instrument protecting the interests of the lending party.

4. Legal Charge

By securing a debt against an asset, parties can introduce an additional layer of safeguarding. A legal charge allows a lender to secure the money they have lent to an individual or a married couple. It can also be registered against the property at the Land Registry (and Companies House, if relevant).

5. Post-Nuptial Agreements

Post-nuptial agreements are prepared after marriage, offering an opportunity to redefine asset division terms. While their enforceability may vary, provided they also meet the relevant criteria, they serve as valuable tools in addressing changing circumstances and help to reinforce financial agreements within the marriage.

6. Other Trusts

By transferring ownership of assets to a trust, parties may be able to create a protective buffer. Standalone trusts, when appropriately structured, offer flexibility and privacy while safeguarding assets for future generations.

7. Long Term Family Wealth Planning

This may involve utilizing various types of trusts, establishing family investment companies and employing strategic tax planning. Tailoring strategies to the specific needs of each client ensures the most effective protection.

B. WHAT HAPPENS IF IT ALL GOES WRONG?

It is important that any couple considering divorce understands how the court would deal with division of marital finances on divorce as their expectations may be very different to what actually happens.

1. The Overall Objective

The overall objective of the court is to achieve a result that is fair and non-discriminatory. The starting point, regardless of the length of the marriage, is always 50:50 and the overriding factor in most cases will be the reasonable needs of the parties.

The court must, however, have regard to all the circumstances of the case, the first consideration being given to the welfare of any minor child of the family. They must also specifically consider the following:

  • Financial resources;
  • Financial needs, obligations and responsibilities;
  • Standard of living enjoyed during the marriage;
  • Ages of the parties and the length of the marriage;
  • Any physical or mental disability that either party has;
  • Financial or other contributions made or likely to be made in the foreseeable future;
  • Conduct of each of the parties if that conduct would be unfair to disregard; and
  • Value to each party of any benefits that they may will lose the chance of acquiring.

When taking these factors into account an equal split of the assets may not be fair. In those circumstances the court can decide to deviate from the equality rule.

2. Spousal maintenance

There is an expectation that each party will aim to maximise their ability to earn or receive an income on divorce even if that means seeking employment for one party who had never worked during the marriage.

If maintenance is likely, there is no ‘formula’ that determines how much might be paid; the court tends to apply a broad-brush approach looking at the reasonable needs or requirements of each party and the income that is available.

3. Pensions

Most working people these days are likely to have some form of pension provision whether that is through their employer or paid privately. Despite this fact many divorcing couples remain unaware that, like other assets of the marriage, pensions can also be shared equally.

4. Pre-marriage Assets

Generally, assets that one party owned prior to the marriage such as property or investments will fall outside of the marital pot. However, the court can include assets that were subsequently used for the family within the pot to share. The court also has a discretion to include such assets where not to do so would mean that there are insufficient financial resources to meet the party’s needs.

5. Inheritance

Inheritance, in the first instance, is considered non-matrimonial property and can be ring-fenced or set apart from the assets of the marriage especially if acquired before marriage or after separation. However, there are circumstances where an inheritance may not be excluded.

DO YOU NEED OR KNOW SOMEONE WHO MAY NEED ADVICE?

Navigating the complexities of family law requires a comprehensive and adaptable approach. Our lawyers are specialists in this field and can advise parties about the options available as well as the pitfalls they may face in their specific circumstances with a view to securing their financial well-being both before marriage and/or throughout the challenging process of a potential divorce.

Understanding how the court might approach your circumstances could alleviate any anxieties and help you to decide your next steps. Taking legal advice may be essential in ensuring that you receive a fair share of the marital assets.

Zharna Sutaria heads a specialist and experienced Family Law Team at Vyman Solicitors.

Zharna has been practising family law for over 25 years, is a Law Society accredited specialist and a member of Resolution meaning her focus is on achieving an amicable settlement whenever possible.

Shreeti Rajdev and Tulshi Shah are also specialists in this field with considerable skill and experience having been in practice for many years. Vyman have a dedicated of team family lawyers, trainee solicitors and support staff whose aim is to help clients understand and manage family related issues in a constructive and cost effective way.

Zharna Sutaria is available on 020 3927 7779 or email zharna.sutaria@vyman.co.uk

The content of this article has been prepared for informational purposes only. This content does not constitute legal advice, nor does it give rise to a solicitor/client relationship. Specialist legal advice should be taken in relation to specific circumstances.