Family Agreements

Every fiancée (or rather their family solicitor) should ask the question, “What happens if you sign a prenuptial agreement and your husband dies?’’ before a prenuptial agreement is signed. This is because although prenuptial agreements record how assets will be divided should a couple separate or divorce, the agreement can also set out how much a spouse will receive if their husband or wife dies. The prenuptial agreement could state that a spouse cannot make a claim against the estate if the will is consistent with the terms of the prenuptial agreement. Many people query the point of putting in details of what a husband or wife will receive following their spouse's death, in the prenuptial agreement. After all, prenuptial agreements are about separation or divorce and wills are for death and estate planning.  However, as Manchester divorce solicitors we normally say that it is a good idea to detail what provision will be made available to a spouse in the event of a death. This is especially the case where there are children from earlier relationships to consider or where a spouse does not plan to leave their entire estate to their husband or wife. The Case of Mrs Hendry The widely reported case of Mrs Hendry is an excellent example of why it is important to have a prenuptial agreement and how it can assist if there is a claim against the estate. Mrs Hendry came from the Philippines to marry her husband. Mr Hendry already had two adult children from a prior relationship, the youngest of whom was twenty-one at the date of Mr Hendry’s death. The marriage between Mr and Mrs Hendry did not last. Mrs Hendry filed for divorce and asked the family court to give her half of Mr Hendry’s assets. Mr Hendry died before the family court decided how the money should be divided. Mr Hendry’s will left his estate to his children and Mrs Hendry was left a small pension. Negotiations started between Mrs Hendry and the two children. Mrs Hendry wanted half the estate of her late husband. The children initially offered her what she would have got under the couple’s signed prenuptial agreement. They later offered her a third of the estate. Agreement could not be reached between the widow and children, resulting in Mrs Hendry making a claim against the estate. Mrs Hendry asked the court to make ‘’reasonable provision’’ for her from the estate under the Inheritance (Provision for Family and Dependants) Act 1975. The judge rejected the claim because Mrs Hendry had not made the application within the six-month deadline from the date of grant of Probate. What makes the case interesting to Manchester divorce solicitors and lawyers advising on wills and claims against estates is that Mr and Mrs Hendry signed a prenuptial agreement prior to the marriage. The prenuptial agreement said, in the event of a divorce, Mrs Hendry would get a payment of £10,000 and a one-way ticket back to the Philippines. It is not clear from the media court case reports what, if anything, the prenuptial agreement said about what would happen if Mr Hendry predeceased Mrs Hendry. However, the judge dealing with the estate claim commented on the fact that the prenuptial agreement only made limited financial provision for her. In the case of Mrs Hendry, she was time barred from making a claim under the Inheritance (Provision for Family and Dependants) Act 1975. However, if she had not been time barred, the fact that she had signed a prenuptial agreement and was separated from Mr Hendry at the time of his death would have been weighed up, together with  the circumstances surrounding the signing of the prenuptial agreement and the needs of Mr Hendry’s children. [related_posts] What can we learn from the case of Mr and Mrs Hendry? There are some simple lessons we can take from this particular case: The importance of signing a prenuptial agreement, and preferably detailing what provision should be made on both divorce and death for a spouse (the estate provision is normally more generous if the couple are living together at the time of the spouse’s death); The need to review wills after a separation or divorce and, if necessary, amend them and/or provide a letter of explanation for testamentary bequests; The importance of complying with deadlines if you want to make a claim against an estate and the benefits of taking specialist legal advice.   For help with prenuptial agreements and financial settlements on divorce or claims against estates please contact us

According to the BBC news a couple of days ago, the number of first-time buyers relying on mum and dad for the deposit to buy their first home or to climb the property ladder has reached a record high https://www.bbc.co.uk/news/business-39381157 This is not surprising, given that house prices are, on average, seven times salary. The problem is a lot worse in London and the home counties. As a specialist family finance solicitor, with many years experience in dealing with divorce and cohabitation breakdown, I have seen plenty of examples of where parents have helped their son or daughter to buy a property, only to find that when their son or daughter’s relationship breaks down, half or even more of that money goes to their ex. Why is mum and dad’s money vulnerable? Many people assume that just because the money has come from their family, or just because the house is bought in their son or daughter’s sole name, the money is protected. This is not true. Partners and spouses can make financial claims over property, even if their name is not on the title deeds and even if they have not paid the mortgage or the bills. Marriage makes the family money even more vulnerable because normally the divorce court will completely ignore the source of funds used to buy the house. Many people assume that just because the money has come from their family, or just because the house is bought in their son or daughter’s sole name, the money is protected. This is not true. Partners and spouses can make financial claims over property, even if their name is not on the title deeds and even if they have not paid the mortgage or the bills. Marriage makes the family money even more vulnerable because normally the divorce court will completely ignore the source of funds used to buy the house. Increasingly, I am being asked by clients how they can protect the parents’ money from relationship breakdown. There are a large number of ways of doing it, and they each have their pros and cons. However, the key message is that whatever way you choose, it needs to be agreed and properly documented at the time the money is provided by mum and dad. The different ways of protecting mum and dad’s money A loan from mum and dad Mum and dad co-owning the house A gift of the deposit Putting the gift of money into a ‘trust’. The trust can then lend, or give money to the beneficiary of the trust fund to buy the house, or even co-own the house with the beneficiary Mum and dad own the house completely, but let their son or daughter occupy the house The best option will depend on the family’s circumstances. That is why it is important to get specialist advice. For example, if parents are wealthy and know that they have a lot of capital that they won’t get through in their lifetimes the option of a gift or trust fund might be the best way to help the family member get on the property ladder and save on inheritance tax. A record of the gift will help evidence it for the tax man and will also help if the son or daughter later starts to live with a partner at the property. If a family is not wealthy then a loan agreement may be the best way forward. The key to a family loan is that it can be prepared to meet the family’s needs over when the money is paid back and if the loan will charge interest or not. You need a cohabitation agreement (or a pre-nup) Whatever option you choose, it is highly advisable to have a cohabitation agreement (or a pre-nup, if son or daughter are definitely going to get married) before the property is bought, which explains what will happen to the house and the money if the relationship does not work. [related_posts] A cohabitation agreement or pre-nup are absolutely essential if mum and dad are going to gift the money to their son or daughter because it is not being protected in any other way (e.g. a loan or co-ownership). If you ask most parents whether they need a written agreement over giving or lending money within the family they say that raising the topic would make them feel uncomfortable. My own view is that it is the parents’ money, it is perfectly reasonable for them to want that money to stay in the family, and it is therefore perfectly reasonable for the condition of that help to be a cohabitation agreement or a pre-nup. Cohabitation agreements and pre-nups are flexible and bespoke to the couple entering into the agreement. The agreement could say that the non-owning partner won’t have any claims at all on the property or it could say how the joint owners will share the equity in the house if they split up. For example, the agreement could say that mum and dad will be paid back their loan first, with interest, or that the partner whose parent’s provided the deposit will get a bigger percentage of the equity. The important point is that if the options on how to give or lend the deposit are explored and the options of how the couple will own a house are carefully considered and recorded there is far less chance of the family falling out with their son or daughter or their in-laws. Contact us If you would like to ask any questions about pre-nup or cohabitation agreements, please contact us. and take a look at our prices online.