I recently met with a high earning couple who were in the process of divorcing and a divorce petition had been filed. Their joint finances were quite complicated and comprised substantial overseas property, a UK buy-to-let investment, complicated shareholding arrangements, UK pension funds and other savings, many of which would generate a liability to pay tax on their disposal. The couple have two children, one of whom is severely disabled, and for this reason the wife was very keen to retain the family home which had been specially adapted. In return the husband was happy to accept a cash sum which he could use as the deposit to buy a new property nearby, so that he could remain near his children.
Prior to my involvement the couple had each instructed solicitors who between them had charged several thousand pounds for drafting an unsatisfactory agreement, essentially a 50/50 split of all the assets. Amongst a number of impractical and unacceptable clauses, this draft agreement contemplated the immediate sale of the family home. It also provided for the immediate disposal of the shareholdings which I explained would result in a very large and unnecessary tax bill that would substantially diminish the couple’s resources.
In the course of my discussion with the couple we determined that the wife had the resources to take over the mortgage on the family home, and indeed extend it slightly. This was because it was established that she was due to inherit a reasonable sum of money from her parents, something which the solicitors had discounted on the grounds that it was not ‘a marital asset’. Accordingly, as a result of my input it was agreed that the family home should be transferred into the wife’s sole name. The husband received the substantial cash payment that covered the deposit and the acquisition costs for his new home and the remaining assets were divided fairly and tax efficiently.
The wife was concerned that extending the mortgage and having a lot of money ‘tied up in the family home’, might leave her short of funds for her retirement. To address this, I provided a detailed cash flow forecast which demonstrated how her pension might grow over the remaining years she was employed. This demonstrated that the arrangements were affordable and that in fact she might be able to retire a couple of years earlier than she had planned.
The net effect of my timely and cost-effective advice was that the couple have remained on good terms and the husband has regular contact with the children. There are none of the arguments that often ensue in case where so-called acceptable settlements are neither fair nor viable and in truth, financial matters are not properly resolved.