A broken relationship doesn’t need to mean broken finances.
It’s over a month from Valentine’s Day. So in case the rosy hue of love’s young dream has worn off, we thought it would be worthwhile looking at the impact of relationships gone wrong on personal finances, especially where there are shared business interests. So here is what you should know on protecting your assets from a divorce.
In England and Wales, divorce is in decline. The most recent 10 years of data show a 28% fall in the number of divorces between 2005 and 2015. But older people are bucking the trend. In the same period, the number of men divorcing aged 65 and over went up by 23% and the number of women of the same age divorcing increased by 38%. These so-called “Silver Splitters” are more likely to have both liquid and illiquid assets. Additionally, with perhaps children having flown the nest, the split of assets can be the most contentious area.
How should I protect my assets should my relationship ultimately break down or result in a divorce?
During a relationship, a spouse may gift the other an asset for nothing in return. Or they may decide to place a partner on the title deeds of a property they once solely owned for ‘love, favour and affection’ or ‘certain good and onerous causes’. And often, a partner without a property may be invited to move in with the partner who does own property to live there at no cost.
Upon irretrievable breakdown of a relationship whether that be of a long term cohabitation, civil partnership or a marriage, one partner may be financially disadvantaged, whilst the other person is seemingly unjustly enriched. Below are some matters to consider when during a relationship that may help protect your own financial assets should your relationship ultimately break down:
- Go into any financial commitment with a partner on an equal financial footing. If you are going to buy a house, make sure you both put down the same amount of deposit and/or invest the same amount of equity. You should also make sure your solicitor reflects this in binding legal documentation. This will mean if your relationship does break down, then after costs, you both will receive an equal share of the final net proceeds allowing you both to move on with your lives independently.
- If you’re asked to sign a personal guarantee to cover company debts ensure that you take your own legal advice before signing.
- Equally, if you’re a director of a company managed by your spouse, make sure you understand your statutory responsibilities. It’s not enough to claim you relied on your spouse to keep you right!
- Never be persuaded to enter into any personal loans, hire purchase or lease contracts on behalf of a partner. This could result in you being the only person responsible to repay the sums due. This can be particularly onerous if your partner has left you following your relationship breaking down.
- If you are a sole trader, make sure you keep your business bank accounts and business assets separate from your personal bank account and personal assets. Be careful with gifting or loaning anything from your business to your partner. It is important to know that you will not be able to recover it easily following a relationship breakdown or divorce.
- If you have drafted a will at the height of happiness in your relationship which is in favour of your partner, make sure on relationship breakdown that you change this to reflect your current wishes. Otherwise your ex-partner could again be unjustly enriched in the event of your death.
What if both parties are shareholders in an owner-managed company?
It may be that the company is a matrimonial asset (a financial asset acquired during a marriage). In this case, it will require to be valued. It may also be that the valuation is needed not at the present day, but retrospective to the date of separation. This is a specialist area and our Corporate Finance experts would be happy to assist.
Get in touch
If you would like advice on a divorce or want to make a confidential appointment, we are here to help. Contact us at FD Business Rescue today to discuss further on protecting your assets from a divorce.