Recently, I spoke at a seminar for female business professionals in Bristol about personal legal well-being. I am sharing my presentation in the hope that some of the tips and pointers may be of use to my business contacts and their clients, friends, family and professional contacts.
Most of us only think of needing legal advice in relation to our personal lives when something goes wrong.
Relationship breakdown statistics are often in the news – 42% of marriages end in divorce, and around half of those are within the first 10 years of marriage.
In my job, most of the people I see come to me “when it all goes wrong” and usually because someone else – be it a friend, family member, business advisor – tells them that they should.
No one really thinks about speaking to a lawyer when celebrating life’s happy events…
We all love a good wedding – I’m sure one or two of you in the room will be watching the royal wedding on Saturday, if not attending a street party to celebrate.
However, life can always throw us a curveball, and indeed has a tendency to do so when we least expect it.
There are benefits to speaking to a lawyer at all stages of life, and in particularly around the time of life-changing events – happy or sad – to know that the decisions that you are making are the best ones for you and your family. Although, I suppose, raising the idea of a pre-nup after proposing isn’t exactly romantic, is it?
Most people think that as a family lawyer, I deal with people’s divorces. Well, I do, but that is just one aspect of my work.
I wanted to give you an overview today of some of the key issues that I see day after day that affect a variety of people, at different stages of life. I hope that this is useful information for you, your family, friends, contacts and clients – and to help recognise when it may be beneficial for them to seek a bit of advice.
Moving in together
The number of cohabiting couples is on the increase – up by more than 30% in the last decade.
However the vast majority of people living with someone don’t know their rights (or lack of). Most people still believe they will be considered “common law spouses” and so will have the same protection legally as married couples if they separate.
This is not the case. Claims are limited to jointly owned property only (and children claims, if relevant).
I recently acted for a client who had been in a cohabiting relationship for 5 years. His partner had moved in with him and he owned the property outright. He continued to pay the mortgage, his partner paid the household bills. On separation, he kept the property and she had no right to a claim, despite her contributions to the running of the home. Happy client, but seems unfair, doesn’t it?
- The law is unlikely to change any time soon.
- Family lawyers continue to lobby for change, but it’s not high on the government’s agenda.
- Think about a cohabitation agreement.
- Have those difficult conversations in advance.
- Be clear at the outset as to your expectations.
Bank of mum and dad
Property prices are increasing, especially in Bristol. For many, it can feel like property ownership is getting further away from your grasp as demand is rapidly outstripping supply. In Bristol, sales are increasingly turning to sealed bids, with people making offers way in excess of the asking price.
As a result, to keep up, more and more people are seeking support from the Bank of Mum and Dad.
Mum and Dad of course will do anything to help their son / daughter to get on to the first rung of the property ladder. But how often do mum and dad think of the long-term consequences of their contribution, or how to protect themselves legally?
I tend to find myself getting involved in this sort of situation when it all goes wrong.
Peter bought a flat with his new girlfriend, Rosie, when things were looking, erm, rosy. Two years later and the relationship sadly hits the rocks, the house has to be sold. An argument quickly ensues as to how the sale proceeds are to be split.
At the time of purchase, mum and dad received no advice and happily gave Peter £50,000 towards the deposit. Now that the relationship has gone sour, they would like their money back, thank you.
Only, they transferred the money straight to Peter just before exchange and as far as they were concerned, that was it. Peter didn’t take proper advice at the time and the sum just got swept up as part of the deposit monies, and was not recorded separately anywhere.
I often find conveyancing lawyers aren’t too hot on this issue and advice given to young couples can often be limited to “how would you like to own the property? Would you like defined shares” and the couple ticking a box. Parents themselves rarely receive advice in this situation and so don’t know that they have to be properly protected to recover their money if it all goes wrong.
The key message for your clients, friends and family in this position – whether mum and dad or Peter – is get some advice – not just from the conveyancer, who will deal with the transactional issues only, but from a family lawyer.
It would surprise me if nobody in this room hadn’t dreamt at least once of winning the lottery. Or thinking of entering Who Wants to be a Millionaire, now that it’s back on TV (although Jeremy Clarkson may put you off…).
I have a long-standing client who won around £3m on the lottery. She was in an abusive relationship. Before I started acting for her, her partner had already convinced her to buy a property in their joint names, and she hadn’t received any advice as to how that should be owned. The relationship broke down a matter of months later, and he walked away with 50% of the sale proceeds, because the property was owned equally, with indistinct shares.
I touched earlier on proposals and prenups. I often speak to clients who want to initiate a pre-nup – usually because they have a significant asset that they want to protect, or because they have received a sizeable inheritance, and/or parents want to make sure that “their” money is protected.
Those same clients feel awkward about raising a conversation with their spouse-to-be about money and what they feel comes across as pre-empting a separation.
I try to get them to see it like an insurance policy – you would insure against things going wrong with your car, your health, so why not your marriage? Often, explaining the reality of financial provision on divorce (and the potential costs of litigation) can be a sobering thought and encourages people to proceed.
Interestingly though, I am seeing more and more couples who openly discuss finances and come to me having already discussed not only the idea of a prenup but also what they want it to contain. This isn’t limited to the super-rich either.
The same goes for post-nups – sometimes a client has inherited funds they want to ring-fence, or they have been through a rough patch but stayed together, but want to have certainty in case it does all go wrong in the future.
The interplay between family law and businesses can be a particularly sticky issue. Most people that I come across 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.
I’ve set out here a few examples of events when family law can have an impact on a business, which 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
Generally it comes down to making sure that there is appropriate provision made between shareholders to legislate for certain events.
This can include what happens to shares if an owner goes through a divorce. There is a risk that that owner’s shares could be distributed in part to a spouse as part of a financial settlement on divorce – and no one wants an unwelcome shareholder interfering in the business! Also of concern is when shares need to be sold to fund a divorce settlement – this can be particularly damaging for small businesses.
For start-ups, this is a really important point to consider – most people don’t consider the wider issues beyond the immediate owners, but it is beneficial for the future health of the business to think about these things now and legislate for them in the unlikely event something bad happens.
Where a new shareholder joins a business, it would be a good idea to consider their personal circumstances, to see whether they should be advised to enter into a pre or post nup to protect the business.
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.
On the horizon in family law
I thought it would be helpful to give you an idea of the [potential] big changes that are on the horizon in my field of work.
There are two family cases being heard by the Supreme Court this week.
- Rebecca Steinfield and Charles Keidan are bringing an appeal against the decision not to permit their relationship to be registered as a civil partnership, rather than a marriage, because they are not of the same sex. The government have not really been interested in changing civil partnership law to make it available for law, since the introduction of same sex marriage. There is wide expectation that civil partnerships will now be phased out.
- The second case is Mr and Mrs Owens. Mrs Owens is appealing against the decision to uphold her husband’s objection to their divorce. He said that the examples of his behaviour cited were not so unreasonable so that she could not be expected to live with him anymore. The court agreed and so Mrs Owens still remains married, despite the fact they have lived in separate properties for several years now. Hopefully, the court will find a way of granting her divorce.
- However, the role of the court is to interpret the law, not to make the law. So, we are unlikely to see any decisions that will result in major changes for the nation as a whole, but it will put more pressure on the government on these two interesting areas in law, in need of reform and clarity.
- However, with Brexit being the government’s main focus, we have heard that it’s unlikely that we will see any such changes until we have left the EU and dealt with the aftermath. Brexit itself is a whole legal minefield, as so much of family law is intrinsically linked with EU law – unless we legislate mirror provisions now, there are going to be huge black holes in family law which will lead to unfairness, costs and judges trying to interpret a flawed system.
Lastly, online divorce is now available to all members of the public (but not yet legal practitioners). For couples who want to manage their own divorce, the only cost to them will be the court fee of £550. However, what they cannot do is separate their finances as part of this process, or ensure that they are protected legally following any agreement reached. This will leave another black hole in the world of family law.
I can foresee people getting divorced, thinking that’s it, not achieving a fair settlement and coming back to me in years to come wanting to sort things out.
What to do, when
Perhaps in hindsight, there has been a little more doom and gloom in this presentation than I intended…!
But in summary, family law can have a wide-ranging, long-lasting impact on life decisions, whether or not we know it. My advice would be to do the research – get advice — know the law and make empowered choices.
I am always happy to have a chat if there’s something that you or a client or friend needs a steer on – remember, knowledge is power!