Protecting financial gifts and inheritance from separation

Sponsored feature | Roopa Ahluwalia, family law partner, HCR Hewitsons

Increasingly, I see clients buying their first home with their partner or spouse when they are more financially established in life, or with the aid of financial assistance from family.

A few years ago, couples were often able to afford a home without such assistance. Inevitably this can create a financial imbalance at the start of a relationship. For most couples, this may be the first time they have lived with one another, and as such, a real ‘litmus test’ for the success of their relationship. What happens when the relationship does not go to plan and how do you protect your financial investment?

As an unmarried couple, it is important that ownership of the property as recorded in the purchase documentation reflects your intentions and reality. There is no such status as a ‘common law’ wife or husband - and if there is a dispute on relationship breakdown, the relevant law is land law which can be extremely costly and burdensome to navigate.

One way of supporting the purchase documentation is to enter into a cohabitation agreement. Not only can this specify the exact shares in which you own the property, but it can also help regulate the financial affairs of your relationship - for example if one person is making a greater contribution to the mortgage payments in order to ‘make up’ or ‘match’ a deposit payment by the other.

Similarly, if there is only one legal owner, the agreement may help specify how certain actions by the other cannot lead to any suggestion that they have some form of financial interest in the property.

It is always worth looking at the practicalities of how you intend to own and regulate your finances in a relationship with your solicitor so as to avoid any unpleasant surprises later down the line.

For married couples, a prenuptial agreement can help. I often see couples about to marry where one of them has established assets. Increasingly, parents are helping adult children purchase their first family home and want to see it protected from distribution to a spouse on divorce.

Whilst prenuptial agreements are not automatically legally binding, a properly drawn and fair agreement is one that a court will have to consider when exercising its discretion, if the matter gets to court.

The aim of both documents is to provide a clear path to what happens on separation or divorce and be the definitive guide, as opposed to being drawn into a court process which can be expensive, time consuming and stressful.

For more information, contact Roopa Ahluwalia on 01223 447472 or 07825 375486 or email rahluwalia@hcrlaw.com.

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