Family Law

Chances are your client or a family member are going through a major life event when you are next in touch, be it a new child in the family, a wedding on the horizon, a separation, starting or selling a business, or, most probably, planning for the twilight years of their life.  It’s not always easy to start a conversation around someone’s personal life, but often the decisions that they are making financially can be good indicators of what is going on at home.

Most people only speak to a lawyer when it all goes wrong – relationships breaking down, when someone hasn’t been provided for in a will, a claim for a product or job that has gone wrong, employment issues or redundancy.

This article sets out a few pointers to where you can add value to your clients’ lives by ensuring they are receiving good legal advice at the right time, to benefit and protect themselves and their loved ones.

Prenups – not yet binding, but nearly there

There seems to be a trend of people dismissing the idea of a prenup offhand, because “they aren’t legally binding”.  Whilst prenups aren’t automatically binding (ie you can’t take it to a judge and ask them to enforce it), when looking at finances on divorce, case law suggests that as long as certain factors are met (including full disclosure and no duress), they will be upheld, and are therefore a worthwhile investment.

Providing the less wealthy party is sufficiently provided for financially (eg they can rehouse and meet their ongoing needs) then chances are it will be possible to ensure that pre-acquired wealth, such as a business, inheritance, a lottery win, or a chunky deposit, can be protected. 

If providing son or daughter with a significant wedding present to assist in their future lives together, it is worth asking them the “what if” question: what if they separate in say 5 years’ time – would you behappy seeing 50% of that money go to your child’s spouse in those circumstances?

Bank of Mum and Dad: beware the implications of the generosity gene

The property market is fast-paced and property prices continue to skyrocket across many parts of the country.  To get a foot on the property ladder, more young people are seeking support from the Bank of Mum and Dad. 

But how often do mum and dad think of the long-term consequences of their contribution, or how to protect themselves legally? It is unlikely that conveyancers acting for their offspring would suggest to mum and dad to get legal advice (their contribution often coming via their son or daughter), but the reality is that unless the proper protections are in place, and their child has also had legal advice and properly protected their share of a property, recovering their capital contribution towards the purchase will be extremely difficult, and expensive. 

Go on, trust me

The family court judges have a wide discretion, and see no issue with “piercing the veil” of a trust or company structure, if it seems to be deliberately designed to keep assets out of a marital pot and deprive a long-suffering spouse of their entitlement. 

The right kind of trust, that has been treated sensibly, can be successfully ring-fenced, if there is otherwise sufficient capital in the pot to meet the parties’ needs. A trust that regularly distributes is going to be more difficult to ring-fence, as is an ill-timed trust, created around the time of a separation.

“I’m getting divorced, but it’s all amicable so we have to wait two years”

Many people think that if they are separating amicably, they have to wait two years to get divorced. This is not necessarily the case, but even if they choose to wait, it’s important to address the financial separation as soon as possible. A lot can change in two years, and it’s important for your client to ensure that they have the proper protections in place early.

A well drafted separation deed can ensure that the intentions of the parties are accurately recorded and help to prevent any nasty surprises if the relationship does break down.

Companies

The interplay between family law and businesses can be a particularly sticky issue. Most people have no idea that their business decisions can have a wide-ranging impact, for example if they later find themselves with a new partner, or going through a separation or divorce. 

The following should be triggers for business owners you know seeking some advice:

• New business
• Getting married
• Retiring and transferring business to children
• Son or daughter getting married
• Helping out children
• Spouse/partner joining the business
• New shareholders
• Buyouts
• Separating

Generally it comes down to making sure that there is appropriate provision made between shareholders to legislate for certain events. For example, on divorce there is a risk that that an owner’s shares could be distributed in part to a spouse as part of a financial settlement on divorce, or sold– and no one wants an unwelcome shareholder interfering in the business! This can be particularly damaging for small businesses.

Another situation we come across a lot is where the company accountant suggests a wife / partner becomes a shareholder or employee of the business as a more tax-efficient way of taking money out of the business.  Whilst this may be beneficial in the short-term, if a relationship doesn't work out, it can be difficult to extract that individual from the business and find a way of replacing that income source.

It's important to get early advice before making any rash decisions. 

There can also be tax consequences depending on the timing of transfer of assets, so again, early advice is essential.

Cohabitation: no such thing as a common law spouse

Unmarried couples are the fastest-growing family type, yet most people aren’t aware of the scant legal protection if you aren’t married.

Most people think that if they live together as though they were man and wife (often coining the phrase “common law spouse”), that they will have the same protections legally as though they had married. This is not the case and legal claims are extremely limited.

Moving in together, or pooling resources to buy somewhere together, it’s important to fully understand the legal implications and to have the right protective measures and legal documents in place, just in case it does all go wrong.

The dreaded P word

Pensions. Not always as straightforward as clients think. It’s a particular bugbear of ours when pensions are lumped in with capital on the asset schedule on separation and we regularly have to explain to clients why a pension pound is not the same as an actual pound. 

The correct pension information that we need generally takes weeks to come through and so we recommend sending Form P off to each pension provider early on, and gathering state pension information at the same time. 

Pension actuaries are rushed off their feet at the moment, and their reports can take weeks, if not months, to arrive.  It’s therefore important to manage clients’ expectations – they can often be put off by the time it takes to resolve pension sharing, and it’s all too easy for someone to forego a pension claim to avoid delaying an otherwise amicable and straightforward separation.

It is also important to remember to update death in service beneficiaries after a separation – something that can often be overlooked.

The TLT Family team advise about relationship breakdown (married and unmarried couples), marital and relationship agreements (including prenups and cohabitation agreements) and international and domestic children matters. Our client base includes high net worth and high profile individuals based across the world.

Colleagues in our Tax & Estate Planning team can also advise in relation to Wills, Estate Planning, Tax, Trusts, Residence and Domicile, Lasting Powers of Attorney, Mental Capacity and Probate.

We cannot emphasise enough the importance of early advice. We are always happy to talk through any thoughts you may have, and to have an initial no-obligation chat with your contacts if ever this would be of assistance.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at February 2020. Specific advice should be sought for specific cases. For more information see our terms & conditions.