The Legal and Financial Considerations of Marriage or a Civil

The Legal and Financial Considerations
of Marriage or a Civil Partnership
www.mayowynnebaxter.co.uk
This paper provides essential reading for anyone considering getting married or entering into a
civil partnership. Although the legal and financial implications of marriage or a civil partnership are
probably not the first thing people think about when getting married or entering into a civil partnership,
it is important to understand the huge legal and financial impact it could have on your life.
Before you get married or become civil partners it is the perfect time to discuss and consider each
other’s financial circumstances and the financial issues that you may face together. Discussing these
issues, and being open and honest about your intentions, can help ensure that solid foundations
are in place to build your future together and to provide you both with some security and prevent
difficulties arising in the future.
Within this paper we will discuss the sort of issues that you and your spouse or civil partner need to
be thinking about, including financial planning, inheritance planning, the current legal position with
regards to Pre-Nuptial/Registration Agreements, whether you should be considering entering into a
Pre-Nuptial/Registration Agreement and how such Agreements can benefit you, your future spouse/
civil partner and your respective families.
Making a Will
If you have not already done so the first thing you should do is see a solicitor and write a Will as this
ensures your new partner receives what you want them to, should the worst happen.
The main reason to make a Will is to ensure that your assets and cherished belongings pass to your
chosen beneficiaries on your death.
People make up a lot of excuses to justify not making a Will. The most common are: I don’t have
anything to leave; it will all pass to my husband / wife / civil partner; my family know what I want; it’s
too complicated; or even, I just don’t want to think about it.
Even if you think you have nothing now, this may not be strictly true. You may have life insurance,
a pension policy or acquire assets in the future or have personal possessions you want to go to
particular specified people. You may also have children to consider.
It is a common misconception that all assets will pass to a spouse or civil partner. This is only the
case in limited circumstances, and depends upon the value of your estate and your immediate
family. Even if they do, if you and your partner both die closely together or one later remarries, your
assets could be left to someone you have never met!
So how would your assets be distributed if you die without a Will? The distribution depends on
whether you are married or in a civil partnership at the time of the death and whether there are
children (or grandchildren) living. If there are descendants your spouse / civil partner receives
£250,000, all personal chattels and the income from one half of the estate. The descendants receive
the balance of the estate on reaching 18. They will receive the capital of the first half on the death of
the spouse / civil partner. If there are no descendants the spouse / civil partner receives £450,000,
all personal chattels and one half of the rest of the estate. The balance of the estate is distributed in
order of priority as set out below:
•
•
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Parents
Full siblings (or their children)
The spouse / civil partner
The process of administering the estate of someone who has died without a Will is very similar to
the position where there is a Will, but the costs can be much higher, particularly if it is necessary to
trace surviving relatives.
Your family may well know your wishes but without a Will, the law dictates who is to receive your
estate. The initial recipient may not be able, mentally or financially, to redirect the funds to your
preferred beneficiary if known, or may simply refuse to do so.
Most people’s lives are complicated. Administering and distributing an estate after death can be
even more complicated if there is no Will. This often leads to disputes, unnecessary tax bills, or
wasted costs.
A well-drafted Will can make life much easier for those left behind and will ensure your wishes are
carried out.
It is also important to note that any previous Will made by either party (prior to their marriage/civil
partnership) will automatically be revoked upon any future marriage/civil partnership. It is therefore
advisable to review any pre-existing Will in any event.
Pre-Nuptial/Registration Agreements
A Pre-Nuptial/Registration Agreement is simply a legal document that describes how property
and assets brought into and acquired during the marriage or civil partnership will be treated if the
relationship breaks down. They are designed to protect the assets of individuals as they enter their
legal union. Should the relationship break down it will help to establish who comes out with what.
They allow you and your spouse or civil partner to have some control over your respective financial
positions, to prevent disputes and decisions by the Court being forced upon you.
In the case of Granatino v Radmacher (formerly Granatino) [2010] 3 W.L.R. 1367 the highest Court in
England and Wales has ruled that such Agreements should be upheld in certain divorce settlements.
The essential principle is that the Court should now give effect if the Agreement is freely entered
into by each party with a full appreciation of its implications, unless in the circumstances prevailing it
would not be fair to hold the parties to their agreement. This effectively means that such Agreements
are likely to be upheld by the Court as long as they are deemed to be fair and do not prejudice the
reasonable requirements of any children of the marriage.
This Court decision is the most categorical sign to date that Pre-Nuptial/Registration Agreements will
now be upheld by the Courts in England and Wales. However, it is not possible for the Courts to rule
that such Agreements should always be legally binding, as that decision is for Parliament to make.
The Law Commission (http://www.lawcom.gov.uk/marital_property.htm) is currently examining
whether the law should be changed to recognise Pre-Nuptial/Registration Agreements.
A Pre-Nuptial/Registration Agreement isn’t essential for everyone. A young couple entering a first
marriage/civil partnership with few assets and debts may not need one. However, if you find yourself
in any of the following circumstances it is most definitely worth considering:•
You are getting married later in life and have already built up assets of your own and you wish
to protect them.
•
You have children from a previous relationship and wish for your assets to be inherited by
them.
•
You are getting married for a second time and wish to keep your assets independent of one
another.
•
You are expecting an inheritance and wish to keep it within your family. A recent survey
carried out by Opinium Research questioned 2,005 people and revealed that many parents
are unwilling to leave an inheritance as their child’s spouse could end up with some of the
assets in the event of a breakdown of the relationship. Pre-Nuptial/Registration Agreements
are therefore one way of addressing this and help to stop potential family disputes arising.
•
You have significant assets such as properties, investments, antiques etc.
•
One of you or both of you own (or partly) own a business. If a marriage or civil partnership
gets into difficulties this can be disruptive to both the management and the long term direction
of the business and therefore it is important to consider how business interests can be
protected. You need to consider the structure of the business and what, if any, interests
you both have. There may be certain taxation issues that you need to consider as a result of
the marriage or civil partnership. A review of the articles of association, shareholder agreement
or partnership agreement maybe necessary.
•
One of you is significantly older than the other.
•
You simply want to ensure your future financial security.
Pre-Nuptial/Registration Agreements remain one of the toughest subjects for couples to discuss.
Many take the view it is unromantic and pessimistic whereas really such Agreements actually
reinforce that the marriage/civil partnership is for love and not money. Couples should regard it as a
practical approach to marriage and sensible financial planning.
However unsentimental it seems, Pre-Nuptial/Registration Agreements are about both parties feeling
secure in their relationship. It doesn’t mean you don’t trust each other or indeed that the relationship
won’t work: in fact, it probably means quite the opposite.
If you are considering entering into a Pre-Nuptial/Registration Agreement it is vital that you raise the
subject with your partner well in advance of your wedding or civil ceremony. To ensure a Pre-Nuptial/
Registration Agreement is fair and to strengthen its weight, it is best practice to ensure that:
1.
You and your spouse/civil partner are entering the Agreement of your own free will.
2.
You and your spouse/civil partner intend for the Agreement to be binding.
3.
There is full and frank financial disclosure of the financial position prior to the marriage to
ensure you are both making an informed decision.
4.
The Agreement must be completed well in advance of the wedding. This is to ensure that
there is not undue pressure put on one member of you to hurriedly sign an Agreement which
may be prejudicial, particularly with the run up to the wedding where there is increasing
excitement. You should allow three months for the Agreement to be finalised and it should
be signed at least three weeks before the ceremony. However, if you have left it too late, the
option of a Post-Nuptial/Registration Agreement can be considered.
5.
You and your partner both have independent legal advice.
6.
You are aware that circumstances may change over time or to an extent that was not envisaged
when you entered into the Agreement and therefore such a change in circumstances may
make the current Agreement between the parties unfair. Provision needs to be made for
regular review of the terms of the Agreement with a view to seeking a variation to the terms if
there is a significant change in the circumstances to ensure the terms of the Agreement
remain fair.
7.
The Agreement meets both your “needs” and takes into account whether there needs to be
“compensation” to one of you to redress any economic disparity that has arisen as a result of
the marriage (for example giving up a career to have children and look after the family). As
long as needs and compensation are covered, the further sharing of assets are more likely to
be prohibited by the Agreement.
8.
You are aware that an Agreement will not be upheld if it prejudices the reasonable needs of
any children of the family.
A Pre- or Post-Nuptial/Registration Agreement is bespoke and should always be drafted by a lawyer
specialising in Family Law.
Buying and owning a property together
You may both be first time buyers and be looking to purchase somewhere to live together, or may be
already living together in a property owned by one or both of you. Alternatively, you may already own
properties in your individual names and be thinking of either selling both and purchasing somewhere
to live together, or looking to move into one of the properties and rent out the other.
Your home is likely to be one of your most valuable assets. It is therefore important that provisions
are put in place at the outset to ensure that you and your spouse or civil partner’s interests are
met. There are numerous options you will need to consider and it is important that you seek advice
tailored to your needs.
If you are planning on buying a property together you will need to decide how you are going to own
the property, agree on it, and make this clear in the documents that are drawn up beforehand.
Importantly, there are two types of joint ownership: Beneficial Joint Tenants and Tenants in Common.
•
Beneficial Joint Tenants. This means the whole property (and the proceeds of its sale) belong
to both of you as one. Neither of you has a separate share which you can sell or leave to
anyone else in a Will, If one of you dies, the other becomes the owner of the whole property.
•
Tenants in Common: This still means that the property is owned jointly but in this case you
specify the shares in which you own the property. This could still be 50/50 but is more
commonly unequal shares for various reasons e.g. one party has contributed a larger sum
of money towards the purchase price. If one of you dies, their share goes to whomever he or
she has named in their Will - this, of course, is another vital reason to ensure your Will is up
to date. If a property is owned as tenants in common it is important that your solicitor draws
up a separate document setting out the shares in the property and how the proceeds of sale
would be divided if the property was sold.
If you already own property together you may not be sure how you own it. It is vital to take legal
advice on the implications of how you own the property both before and after your marriage/civil
partnership. You can usually change a joint tenancy into a tenancy in common at a later date but
you will not be able to change a tenancy in common into a joint tenancy.
If your property is already owned by you or your partner, and one of you has moved into that
property, it is likely that the property is in that person’s name. This is something that you need to
consider especially if you or your partner have begun to make contributions towards any outgoings
or maintenance of the property.
If you marry or register a civil partnership and then separate, the way in which you own property
could have a serious impact on how any properties are divided up. In any event it should be noted
that your spouse/civil partner may have a claim on any property whether owned solely, jointly as joint
tenants or jointly as tenants in common in any subsequent proceedings. This is where a Pre-Nuptial/
Registration Agreement can be of significant value.
Financial Planning
Financial difficulties can put a strain on even the strongest of relationships. It is important that you
give some thought to ensuring that you and your partner have financial security. You and your
partner will of course want to ensure that provisions are in place to meet your needs as individuals,
a couple and as a family, so you can be as prepared as you can be for whatever life throws at you.
Some of the options you should consider include saving for the future, as well as provisions to
protect your income which could be lost or reduced if you have an illness or accident. The thought of
death is not one that we like to consider but if you have life assurance in place you will know that your
loved ones will be provided for financially if the worst happened. You may have a house already and
a mortgage or be considering purchasing or taking out a mortgage together. It is therefore important
that you ensure you have the right mortgage deal in place. Although retirement may be a long way
off it is important to save for this event and the tax breaks in pensions make this a very attractive
option. If you are planning on having children together then this leads to further financial issues to
consider, such as a nest egg for them as well savings for school or university fees.
The above is not by any means meant to be an exhaustive list. There are lots of choices and options
so it is difficult to know where to start as the financial world seems to be becoming more complex by
the day. We recommend that you speak to an Independent Financial Adviser as they will be able to
help you through the range of options available and give the advice you need.
Summary
This is a summary of some of the legal and financial issues you should consider when getting
married or entering into a civil partnership and is not intended to be a substitute for assistance
tailored to your circumstances.
Mayo Wynne Baxter LLP have an experienced team of lawyers specialising in Family Law who can
assist you. They work closely with the Property and Probate, Wills and Trust teams, as well as with
financial and tax advisers to ensure all your needs can be met.
Contact us
If you would like further advice on any of the issues raised
within this paper please do not hesitate to contact a
member of the Family Law Team today for a confidential
and personal consultation on 01273 223231.
www.mayowynnebaxter.co.uk
www.mayowynnebaxter.co.uk
Mayo Wynne Baxter is the trading name of Mayo Wynne Baxter LLP which is a limited liability partnership. We use the word partner to refer to a member of the LLP or an employee or consultant with
equivalent standing and qualification. Offices at Brighton, Eastbourne, Lewes & Seaford.
Mayo Wynne Baxter LLP is regulated by the Solicitors Regulation Authority