September 2018 Blended Families: Protecting your loved ones... Presented by: Caroline Eaton Family Solicitor Jennifer Nash Wills, Trusts and Probate Solicitor
Agenda Caroline:- • What is a Blended family? 5 • Cohabitation agreements and Declarations of Trust • Pre-nuptial agreements • What happens when a relationship breaks down? Jennifer:- • Inheritance – the difference between married and unmarried couples • Estate Planning – what challenges do blended families face? • Updating your Will - protecting your own children and providing for your new spouse
Modern Family Life – the Stats 5 • There were 12.7 million married or civil partner couple families in the UK in 2016. • This was the most common type of family, although rates declined from 53.4% in 1972 to it’s lowest rate of 50.7% in 2011. • However, the numbers are steadily rising again.
Modern Family Life – the Stats • Cohabiting couple families were the fastest growing 5 family type between 1996 and 2016, with the numbers more than doubling • 1996 – there were 1.5 million couples living together • 2015 – this had risen to 3.3 million https://www.ons.gov.uk/peoplepopulationandcommunity/birthsdeathsandmarriages/families/bulletins/fa miliesandhouseholds/2016
What is a blended family? 5 • One couple may have children together, and children from previous marriages or relationships
What is a blended family? So what issues to we need to think about? • People are getting married later and may have accrued their own 5 assets before the relationship – they may want to protect those assets. • There may be children from previous relationships – parents may wish to protect their assets, or some of their assets, for their children. • They may want to make some provision for their partner going forward. • They may have been through a divorce or relationship breakdown before, and might want to avoid the uncertainty and stress again.
Meet Rod… 5
Meet Rod… 5
Marriage #1 – Rod & Alana • Married in 1979 and divorced in 1984 • Two children together – Kimberly and Sean 5
Marriage #1 – Rod & Alana The assets; 5 • Alana moved in with Rod to his solely owned home. • They decided to set up a joint account for bills. • Rod accrued savings of £400,000 during the marriage. • Alana stopped work to look after Kimberly and Sean. She stopped paying into her pension at this point. • Rod had an annual income of £200,000.
Rod & Alana divorce… So what happens when there is a divorce? Couples automatically receive financial claims against each 5 other upon marriage. Claims in regards to; • Income – maintenance, capitalised lump sums etc. • Property – sale, transfers, deferred sale etc. • Pensions – sharing, offsetting. Years of cohabitation are taken into account .
Rod & Alana divorce… Matrimonial Causes Act 1973. • The starting point is an equal division of all assets, including those in sole or joint names. 5 • This is only a starting point, and in order to achieve something that overall is fair to both parties, all the circumstances of the family are taken into account. • Family assets will usually be shared, sold or transferred upon a divorce. • Negotiation, mediation, Court action. • Wide range of discretion EQUALS UNCERTAINTY
Rod & Alana divorce… So what may have happened to the assets? • Alana had a legal interest in the family home, despite it being solely owned by Rod. She stayed in the house whilst the 5 children were young, and on sale the proceeds were divided 50/50. • The joint account was divided equally. • Rod’s savings were divided equally. • There was a pension sharing order transferring a % of Rod’s fund to Alana. • Rod paid spousal maintenance to Alana for 14 years. • Rod pays child maintenance for Kimberly and Sean until they reach 18 years or finish full time secondary education.
Cohab #1 – Rod & Kelly • Rod met model Kelly Emberg and they started a relationship in 1983 (note the overlap….) 5 • Their daughter, Ruby Stewart, was born in 1987. • Rod and Kelly did not marry. • The separated in 1990.
Cohab #1 – Rod & Kelly The assets; • Kelly moved in with Rod to his solely owned home. 5 • They decided to set up a joint account for bills. • Rod accrued savings of £800,000 during the relationship. • Kelly stopped work to look after Ruby. She stopped paying into her pension at this point. • Rod had an annual income of £500,000.
Rod & Kelly break up… As an unmarried couple, when did Rod & Kelly acquire financial rights from each other? 5 • If they bought property together? • When Ruby was born? • After a certain number of years? When do cohabitees become Common Law husband and wife?
Q. When do cohabitees become Common Law husband and wife? 5 A. They don’t!
Rod & Kelly break up… What happened to the assets? 5 • Kelly has no legal right of occupation of Rod’s house, and she does not have a legal interest. She has to move out and she is not entitled to any equity. • She receives 50% of the joint account. • Kelly has no interest in Rod’s savings account. • Kelly can make no claim against Rod’s pension . • Kelly cannot get spousal maintenance.
Rod & Kelly break up… What can Kelly do? 5 • Kelly makes a claim under Schedule 1 of the Children Act 1989. • Rod buys a house for Kelly and Ruby to live in. When Ruby turns 18, the house reverts to Rod in full and Kelly has to move. She has no legal interest in the equity in the house. • Rod pays child maintenance.
Marriage #2 – Rod & Rachel • Rod and Rachel Hunter marry in 1990 and divorce in 2006 • They have two children together, Renée and Liam. 5
Marriage #3 – Rod & Penny • Rod and Penny marry in 2007, and they’re still together ! • They have two children together, Alistair and Aiden 5
So, what are Rod’s (or his partner’s) options… Rod has a wife, 2 ex-wives, an ex-partner and 8 children by 5 women. 5 “Instead of getting married again, I’m going to find a woman I don’t like and just give her my house” How does he; • Protect himself? • Protect his partner? • Protect his children?
Cohabitation Agreements • Very useful in formalising any agreement about the finances. 5 • Can include arrangements made whilst living together, and what would happen in the event of a separation? • This could reduce or eliminate potential arguments in the future as the intentions and expectations are set out clearly. • A Cohabitation Agreement can be entered into at any time, before a couple start living together or if they have been living together for some time.
Cohabitation Agreements The Cohabitation Agreement is a bespoke document drafted as a 5 formal deed and signed in the presence of witnesses. The Agreement generally deals with three main areas; 1. Who owns (and owes) what at the time of the agreement and in what proportions. 2. What financial arrangements you have decided to make whilst living together. 3. How property, assets and incomes etc should be divided on any later separation.
Cohabitation Agreements What can it cover? 5 Pretty much anything you want. We usually include; • Property • Money and bills • Pensions • Personal possessions • Children • Update and review clauses • Agreements to make Wills
Cohabitation Agreements And if a couple breaks up? 5 • A Cohabitation Agreement is not wholly legally binding, but is very persuasive. • It can be relied upon as evidence of an agreement and may be very hard to challenge. • Because all the arrangements had been agreed and incorporated into a Deed, there may not be a desire to challenge it.
Cohabiting Couples - Property In your sole name 5 Do you want your partner to acquire an interest? No Yes Consider Consider entering Consider entering transferring the into a Cohabitation into a Cohabitation house into joint Agreement Agreement names*
Cohabiting Couples - Property In your joint names 5 Joint Tenants in Tenants Common Equal In unequal In equal shares shares? shares? Declaration of Trust
Cohabiting Couples – Property What happens if you separate? 5 In the first Other party instance, only may have to Sole name the legal attempt to owner has an establish an entitlement interest
Cohabiting Couples – Property 5 What happens if you separate? Joint Can this be 50/50 Tenants challenged?
Cohabiting Couples – Property 5 What happens if you separate? Tenants in What does the Can this be Common – Declaration of challenged? unequal shares Trust say?
Cohabitating Couples – Property Establishing an interest in a property can be difficult and very expensive. 5 In very simplistic terms, there are 2 main types of interest; Resulting Contribution Interest can Trust of capital be quantified Common Interest will Constructive intention to need to be Trust share the quantified property
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