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It is preferable to put protective financial measures in place at the start of the relationship rather than when the relationship is already at an end.
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Different types of relationship have different legal consequences to consider.
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Marriage and civil partnership are both a formal legal status and give the court's the powers to interfere with all of the parties' finances.
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Cohabitees do not have any legal status and therefore no property or financial rights attach to this relationship. If a dispute arises this is dealt with by property, trust and company law.
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If however a couple is cohabiting for a number of years and then marry, the whole length of their relationship will be considered by the family courts.
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For unmarried couples property held in joint names should include a declaration of trust to reflect differences in contributions and how equity is to be distributed on a sale.
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Consider keeping business assets in one party's sole name so they retain control over it in the event of relationship breakdown.
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A pre-nuptial, pre civil partnership or cohabitation agreement can provide a certain level of protection if certain guidelines are followed.
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If a lifetime gift is made for example with a view to avoiding inheritance tax, that gift will be considered an asset of the marriage should the relationship break down.
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Discretionary trusts give more protection and there is a better prospect of excluding them from the marital assets, although the court can vary them in certain circumstances.
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It is preferable to keep personal and business affairs separate. If this is not possible, include protective measures in the company documents such as prescriptions on transfer provisions and pre-emption rights.
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Partnership agreements should include what will happen should the relationship break down.
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If you employ a spouse or partner they will acquire employment rights which can run in tandem to their matrimonial rights.
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A spouse may be entitled to maintenance. If they continue to receive a salary this will attract tax reliefs as opposed to possible maintenance payments which will not.
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A cohabitant may be more likely to pursue an employment claim as they do not benefit from any maintenance obligation.
Tina Dunn is a Partner in Mace & Jones' Family Department. She is also trained as a
collaborative lawyer and mentor. Tina specialises in the financial consequences of relationship breakdown, and resolving the issues that affect the children of that relationship. She has a particular interest in dealing with the business and company aspects of cases. Tina can be contacted on 01565 634234 or
tina.dunn@maceandjones.co.uk. More information can be obtained at
www.maceandjones.co.uk.
