Family Law

The recent case of Y v Y [2012] EWHC 2063 is a useful reminder of how the courts treat inherited assets upon a divorce.

The extent to which the courts take inherited assets into account will depend on the circumstances of the case; such as the length of the marriage, the parties’ financial resources, their needs and how the assets have been dealt with during the marriage.

Inherited assets are often treated as non-matrimonial property, however, if they contain a property used as the family home or the assets were intermingled or used by the family then the court are likely to deem these assets to be matrimonial property.

The court’s approach as set out in the case of White v White in 2000 made it clear that whilst there might be a distinction between matrimonial property and non-matrimonial property this will carry little weight, if any, in a case where the parties’ financial needs cannot be met without recourse to this property.

Whilst inheritance will be considered a contribution towards the marriage and credit given for this ultimately this factor will be trumped on the basis of need. If the couple requires the inheritance to meet their needs then the significance given to the inherited asset would diminish.

In Y v Y this showed even where there were significant assets the court still needed to divide some of the inherited assets to meet the parties needs.

The facts of the case were unusual. The husband inherited and managed the family estate comprising a country mansion with staff cottages surrounded by over 1600 acres of gardens and farmland; further residential properties; a farm with farmhouse; commercial properties; an Equestrian Centre and a pub! The estate was valued at nearly £36 million gross and nearly £23 million net.

The parties were married for 26 years and the wife sought a significant portion of the estate to meet her reasonable long-term needs. The court awarded her 32.5% of all assets to meet her needs reflecting the lifestyle they had lived. However, she did not receive an equal share which she would have received if the bulk of the assets had not been inherited.

It may be possible for inheritances received by a party before or during the marriage to be ring fenced, or at least partly protected, by entering into either a pre-nuptial or a post-nuptial agreement. Such agreements will often be respected as fair and can be a valuable insurance policy for the future.

For expert and specialist advice please contact Andrew Kingston on 01635 521212 or andrew.kingston@clmlaw.co.uk.

The Financial Times has recently reported that there has been a significant increase in the number of farmers signing up to pre and post nuptial agreements to protect their wealth from enlarged divorce payouts to their spouses. The reasons behind this are two-fold. Firstly, over the last 5 years the price of farmland has seen a significant increase from an average of £3,000 per acre to £6,000 per acre.

Farmers and their family members need to be aware that under matrimonial law inherited property such as a farm is not automatically ring fenced and protected on a divorce. The court is entitled to take all assets into consideration and if those assets are needed to ensure the parties’ needs are met – then this will take precedence over where the asset came from. Matters are more complicated in farming cases as the matrimonial home is often the farmhouse and surrounding land as so its value is normally taken into account by the courts and added to the matrimonial pot for division.

Radmacher -v- Granatino

Coupled with the increase in value of farmland is the increasing weight that courts will now give to pre and post nuptial agreements. In the recent Supreme Court landmark decision of Radmacher -v- Granatino it held that courts should give effect to a nuptial agreement freely entered into by each party with a full appreciation of its implications unless in the circumstances prevailing it would not be fair to hold the parties to their agreement. This decision has given significant weight to the signing of nuptial agreements, which had previously provided little guarantee upon the breakdown of a marriage.

All farmers should now seriously consider entering into either a pre-nuptial or post-nuptial agreement to protect their family wealth from enlarged divorce payments which otherwise would go to their spouse.

If a farmer does not enter a pre- or post-nuptial agreement then they can be faced with the very unwelcome prospect of either selling farmland or borrowing money to finance a fair divorce settlement.

For expert and specialist advice on pre-nuptial and post-nuptial agreements please contact Andrew Kingston on 01635 521212 or andrew.kingston@clmlaw.co.uk.

Q. I bought my house nine years ago with my partner but we split up five years later. I now want to sell it but my ex-partner says he is entitled to 50 per cent of the sale even though he has not contributed a penny towards the mortgage in the last four years. What is he entitled to?

You could have avoided this dispute by taking proper legal advice either when you set up home together or when you separated. So often arrangements between couples are founded on “trust” and there is a reluctance to incur legal fees in documenting transactions. However, it is usually in the interests of all parties that steps are taken to avoid the potential for costly litigation further down the line.

Ideally, you should have tried to come to an arrangement with your partner to transfer the property into your sole name when you split up and agreed what amount of money he was entitled to for his share of the property at that point. Perhaps, financially, you were not in a position to do this.

So what can you do now? Where the property is jointly owned, there will be a presumption of joint beneficial ownership unless there is an express declaration otherwise. In joint names cases, the presumption is difficult to rebut but it can be done by demonstrating that the parties had a different common intention as to their share of the property,  either at the time the property was bought or later.

The case of Kernott v Jones decided by the Supreme Court in November 2011 upheld an earlier decision that joint owner Mr Kernott was entitled to only 10 per cent of the property, based upon the parties’ common intention changing following their separation. This decision has been welcomed by family lawyers because it gives more clarity about property division for those living together.

As a law firm, we see many cases such as yours. The good news for you is that there is a growing willingness of the courts to get away from the rigidity of the default position of 50/50 and to use powers to adjust property shares based on evidence of what must havebeen intended by people’s conduct after the acquisition of the property.

It is always difficult to find good evidence to make this apportionment because ‘what happens if it goes wrong’ is usually a million miles away from what the parties are thinking about when they are ‘starry- eyed’ about a ‘permanent’ relationship. This is why there are good reasons to get advice both before you set up home with someone and/or at the time of a break up because things might not be quite as you think.

For further information contact Suzy Hamshaw on 01488 682506 or suzy.hamshaw@clmlaw.co.uk

We have had a number of enquiries recently about Pre-Nuptial Agreements.  They raise the ISSUE of whether sensible adults should be free to determine their own  property affairs or whether the Court should always retain its powers to protect the vulnerable from exploitation and try to ensure fairness? 

As always it is a balancing act.  There was a lot of publicity after the Supreme Court Case of Radmacher –v- Granatino last year when the Court seemed to say that a written agreement governing how property should be split should be “given weight” by the Court provided that it is entered into freely.

But the law is still uncertain as to what is required to make these agreements binding.  The Law Commission has published a consultation paper about this and the consultation period has just closed.  It may be that the current uncertainty will be resolved shortly by Act of Parliament.

While we wait, Clients have to decide whether it is worth their while entering into such agreements.  No guarantees can be given, but it is likely that more weight will be given to such an agreement if it is-

• Clearly worded and entered into freely
• Each party has received independent legal advice before entering into the agreement
• Each party is able to demonstrate that they have had full disclosure of the other’s assets and means

So at the moment we can only advise on client by client basis.  The Courts have always jealously guarded their rights to exercise their powers to ensure fairness by disregarding earlier informal agreements.  It may be that, in some cases in the future, clients will be able to ring fence pre-acquired wealth such as a business, a farm or inherited assets. 

We all await the outcome of the consultation paper after which we will be able to advise in more detail.

And so the seven month wait is over and judgement has finally been delivered.  A majority of 8 out of 9 members of the Supreme Court dismissed Mr Granatino’s appeal against the decision of the Court of Appeal, which he said attached too much weight to the Pre-nuptial agreement between him and his former wife Ms Radmacher.

The result of this outcome is that Pre-nuptial agreements will have significant importance in determing the outcome of a financial application to the Court within divorce proceedings.  What the judgement does not and cannot do, of course, is make Pre-nuptial agreements legally binding but it does take us much further towards this position in the future.

The case of Radmacher has established the principle that “the Court should give effect to a nuptial agreement that is freely entered into by each party with a full appreciation of its implications unless in the circumstances prevailing it would not be fair to hold the parties to their agreement” and this principle applies to all ‘nuptial’ agreements whether ‘pre’ or ‘post’.

Whilst a Pre-nuptial agreement is still not a watertight guarantee, it is certainly going to be worth having one!

All 195 paragraphs of the judgement can be found on the link below…

http://www.familylawweek.co.uk/site.aspx?i=ed68495

This morning, we in the family team are eagerly awaiting the judgement in the landmark Pre-Nuptial case of Radmacher and Granatino.  In March, nine Supreme Court justices heard the appeal by Nicolas Granatino and have spent seven months considering what level of award should be made to him in light of the Pre-nuptial agreement that the couple entered into.  Pre-nuptials are not, at the moment, legally binding, although are often a factor taken into account by the Judge when deciding a case.  The result of this case and a review by the Law Commission should lead to clarification on the legal standing of such agreements, something that is long overdue.

Watch this space for further news later this morning…