Divorce

A woman has been awarded a share of her husband’s inheritance 22 years after they separated in a ground breaking divorce settlement.

The couple, who met in 1979 and married in 1982, lived as husband and wife for just four years before separating. They had one child together and never formally divorced.

After their separation the husband inherited £120,000 that he invested in property. Last year the property sold for a total of £1.1 million. The woman claimed that her husband had not supported her or their son throughout their marriage or after they split either financially or emotionally.

She had not divorced him earlier as their child was young and she didn’t want him to suffer the effects of a messy divorce.

The woman’s lawyers claimed that she had been financially disadvantaged because of the lack of support from her husband and that she needed security for housing and a pension provision.

The Court took the view that the woman did have an identifiable ‘need’ and that this need could be met without any injustice to the husband, even though it was out of an inheritance he received
after their separation.

This case just goes to show the importance of ascertaining a clients circumstances in relation to previous partners. It also highlights the importance of using trusts to leave legacies to people whose estate may itself be open to third party claims, such as a divorcing spouse.

source: The Society of Will Writers

Recent case law has shown that judges can take a headstrong view of trusts, deciding on how assets should be distributed between the couple and then appearing to interpret the law to suit the circumstances. How the court will view trusts will depend on whether the trust is an ante (before) or post (after) nuptial settlement or not.

The Matrimonial Causes Act 1973 gives the court the power to vary the terms of ante and post nuptial settlements and can make orders directly against the trustees to make payments or transfer property. The courts view which settlements fall within the scope of this Act very widely and their interpretation of ‘nuptial’ is encompassing of many trusts. It is likely that
any trust created after marriage could fall within the term ‘nuptial’ and any made prior to
the marriage will also be included if there is a connection to the spouse or marriage. Case
law shows (see for example K v K [2008] 3 FCR 773) that settlements made prior to a marriage, even where the parties were living together, would not fall within the definition where marriage was not in the contemplation of the parties.

The provision to vary settlements has its origin in s.45 of the Matrimonial Causes Act 1857. In
circumstances where a wife had committed adultery the section gave the power to the Court to deprive her of benefits under settlements that contemplated that she would remain faithful to her husband and the marriage would not fail.

An extreme use of the law can be seen in In E v E where an extremely wealthy father settled a
home on his son and his family. The beneficiaries of the Trust were the husband, the wife, their three children, any future children, and any future wife of the husband.

The father was the Protector of the Trust.

Divorce

When the daughter-in-law left the home to live in rental accommodation with another man, the father was furious.

The Court directed that £250,000 should be “pulled out of the Trust and made into a separate fund for the wife” and that: “£50,000 should be given absolutely to the wife and the balance of £200,000 should be settled on her for life…” Even if the trust is offshore the court can still
vary the terms of the trust without joining the trustees as parties but the court will have to
consider the enforceability of varying the trust (i.e. binding the trustees).

Where a trust is not considered to be a ante or post nuptial trust the court cannot make orders varying the trusts but any benefits of the respective party will not be ignored.

So what advice can you give your clients?

Ensure that if they wish to use trusts that they are set up well in advance of their children
deciding to marry. This will lessen the risk of the courts being able to vary the terms and
make payments to the spouse on divorce.

Such agreements have attracted considerable attention in recent months after the judgment of the Supreme Court in Radmacher v Granatino, which went further than ever before in recognising their significance. But the Supreme Court’s decision was made in the context of the existing legislation. As it stands, the law does not allow a couple to prevent each other from asking the courts to decide how their property should be shared. And it is still down to the courts to decide on a case-by-case basis how much weight to give to any agreement the couple may have made. In many cases this can offer important protection but it can also lead to uncertainty and expensive litigation and there have been calls for statutory reform.

In its consultation, the Law Commission is asking whether the current legislation which is a generation old provides the right basis for determining the effect of marital property agreements, or whether a new approach is needed.

Could reform bring more autonomy and certainty to couples who want to enter into such agreements, while retaining sufficient safeguards to protect vulnerable spouses and children?

Professor Elizabeth Cooke, the Law Commissioner leading the project, said:

“Pre-nups are a topical issue. Under the current law the starting point for the resolution of financial division on divorce is the discretion of the court. Some feel that where couples have reached agreement, the courts should not be involved; yet the courts’ approach is primarily protective, and some feel that they should not be wholly excluded.

“Our consultation paper considers the arguments for and against reform and examines how a new approach might balance the desire of some couples to plot their own future with more certainty against the need for safeguards against exploitation and the creation of hardship. This is an issue that needs to be handled with care.”

1. Take some legal advice
2. Change your will
3. If you own a house in Joint names with your spouse then you should change it to Tenants in Common

Why do these things?

Legal Advice – it’s always best to know what your rights are and what steps it is necessary to take in order to get Divorced, 10 minutes on the telephone with a Solicitor can give you all the information you need and you’ll be given a quotation for the cost of your Divorce too. click here to access Legal Advice

Change your Will – At present, if you have wills written, then they probably give everything to each other, and as you’re getting a Divorce, you probably don’t want that any more so change your will to reflect your current wishes. Do it now – click here

Tenants in Common – No matter what it says in your will, if you own your house Jointly with your Spouse, then they will inherit your half if you die whilst the house is in Joint names. This can be altered by changing to Tenants in Common, then your half of the house is controlled by your will so you can gift it to your new partner or members of your family without having to worry about it going to your Spouse whom you are divorcing. Do it now – click here