In a world that is increasingly complex and uncertain it is important to consider how assets can be protected when making life changing decisions during life as well as upon death.
Examples of these events include: –
- Cohabitation and moving in together.
- Marriage whether it be for the first time or remarriage.
- Having a child or children.
- Receiving an inheritance.
- Making a will to give clarity to your wishes and certainty when you die.
Cohabitation
It is crucial to remember that in Jersey there is no such thing as ‘a common law marriage’. Unmarried couples therefore have little or no legal protection if the relationship breaks down. This is particularly important as often in Jersey any home purchased during cohabitation is in the sole name of the partner with housing qualifications.
What should be done to protect assets?
The most effective way of protecting assets is by way of a cohabitation agreement. This is a legally binding contract for unmarried couples that outlines financial and property rights which will prevent costly disputes if the relationship breaks down. It can deal with the division of equity in the home, what happens to chattels and pets and even deal with debt responsibilities.
In order for the agreement to be binding, it is important that both partners take independent legal advice and fully disclose the assets that they each bring into the cohabitation and give careful thought to asset and debt division.
The agreement should be review and updated whenever there is a major life event such as the birth of a child.
Marriage
Upon marriage each spouse acquires certain rights and responsibilities towards the other. These will apply whether it is a first or a subsequent marriage for them.
Before the marriage consideration should be given to entering into a pre-nuptial agreement. This is even more important if the marriage is a second or subsequent marriage for one or both intended spouses. Such an agreement is also highly desirable where older couples are getting married who may already have children and/or wealth built up.
It is increasingly common for a married couple to consider a post-nuptial agreement. This will often be in response to a change of circumstances such as the birth of children or receiving an inheritance. The rules for post-nuptial agreements broadly follow those for pre-nuptial agreements as discussed below.
What steps should be taken?
Neither pre nor post nuptial agreements are automatically binding on the Royal Court in the case of divorce proceedings. However, if certain steps are taken when entering into an agreement the Court will take note and give serious weight to it. These steps include: –
- That both parties take independent legal advice.
- That the agreement is on the face of it fair to both parties.
- That both parties have made full disclosure of their financial assets.
- Ideally that the agreement is signed at least 28 days prior to the marriage.
If these steps are followed, it is possible for both current assets as well as any future assets (on say inheritance) to be covered in the agreement.
As with any agreement it is really important that it is reviewed periodically and this is essential where, for example, a child is born.
Contrat de Mariage
In Jersey occasionally instead of entering a fully-fledged pre or post nuptial agreement, the parties enter the above. Usually, this contract is for a specific purpose and can alter the legal effects of a marriage. An example of this is it can be used to oust one spouse’s rights on the death of the other where otherwise dower or legitime would apply.
Making a Will
In order to fully plan for the future and protect assets a Will should be made. This is one of the most important documents that anyone will ever sign. There are many reasons for making a Will, but these do include ensuring that family assets are divided appropriately between spouses, former spouses and children. Where there are minor children a will can also appoint a Guardian to care for them until their majority.
In Jersey assets are divided into two types – movable and immovable. Movable assets include cash, bank accounts, investments, shares, share transfer property and personal possessions. Immovable assets include real property, flying freeholds and leases of more than 9 years.
The law of succession in Jersey is complex particularly as it includes forced heirship rights (legitime). This means that surviving spouses and children can claim 1/3rd of the movable estate. This will be the case even if the Will has excluded some or all of these from inheriting. Such rights of legitime must be claimed within a year and a day of the death of the deceased. Different rules will of course apply if there are no wills (intestate rules).
Complications can also occur where spouses are separated but not yet divorced.
It is crucial to remember that in Jersey an existing Will is not entirely revoked on divorce or on marriage. In order to avoid difficulties arising any existing Will should be either revoked and a new Will made or at the very least varied.
Special Circumstances
Children
Whenever a child is born during the relationship the following should be considered: –
- Do the terms of any cohabitation agreement need to be changed to reflect the birth of the child?
- A pre or post nuptial agreement should be varied to consider any changes to financial provision that may be necessary following the birth. This might include the way that any property inherited by one of the spouses has been dealt with in the initial agreement.
- A Will should be varied following the birth of any child. Provision might be made for the appointment of a Guardian for any minor child and any preference as to who should be appointed as a tutuer in the event that a tutelle is necessary.
Inherited and/or Non-matrimonial property
Since the landmark case of White and White back in 1980 the court when dealing with assets on divorce must consider what is called the ‘yardstick of equality’. This assumes a starting division of 50/50 of the available assets. In reality cases, particularly those involving substantial assets, do not end up with a 50/50 division. This is often the case where there are arguments about non-matrimonial property. These may well also be cases where there is a pre or post nuptial agreement in place.
In recent years the Royal Court needs to consider whether a case is a needs case, a sharing case (a presumption of 50/50) or in rare cases the compensation principle.
A recent English case of Standish confirms for the first time that non-matrimonial assets are NOT subject to the sharing principle. Such non-matrimonial assets might include property brought into the marriage through inheritance or where business assets had been built up by one spouse prior to the marriage.
A complicating factor, however, is the question, when does such property become matrimonial? This is discussed by the Supreme Court in the Standish case. Examples of when this can happen are as follows: –
- Where the non-matrimonial assets have grown because of matrimonial contributions and the non-matrimonial component becomes insignificant. This might, for example apply to growth in a business during the marriage.
- Where non-matrimonial assets have been mixed (mingled) with matrimonial property for the benefit of the family (perhaps the purchase of a holiday home) using non-matrimonial assets. It is therefore essential that any non-matrimonial assets remain separate and are not used for the benefit of the family.
- The matrimonial home will always be matrimonial property even if non-matrimonial funds were used to acquire it. This will also be the case on a second marriage if a property that was owned by one spouse only prior to the marriage becomes the family home.
In the case where there is non-matrimonial property the court is going to be far more likely to be persuaded that it should treat the property in this way if there is a pre or post nuptial agreement.
Trusts
Another common issue that often needs to be resolved in divorce proceedings is whether the financial division of assets can be enforced against a trust that may exist. This is probably the most complex area for consideration regarding the asset split. There might be an application by the other spouse to vary a trust, claim trust assets as part of the matrimonial award or simply to treat the trust as a ‘financial resource’ in order to pay maintenance or a lump sum.
In divorce proceedings before the Royal Court, it will usually be a Jersey trust that is being considered. A key consideration is whether the trust is a nuptial settlement that can be varied or is capable of being made subject to a lump sum or other order by the court. The court will need to be satisfied that the trust has a nuptial quality.
In circumstances where the trust does not have a nuptial element (which will be the case with many trusts) the spouse seeking to have the trust taken into account will need to show that the other spouse is clearly a beneficiary of the trust, and that interest should be taken into account when making a matrimonial award. In circumstances where the court is persuaded to do this then the spouse who is the discretionary beneficiary has no right to compel that trustees to make a distribution to them. This may well place both spouses in a difficult position.
Therefore, where one party to the marriage is aware that he or she is a discretionary beneficiary to a Jersey trust then it is essential in order to avoid expensive litigation within divorce proceedings for the existence of this interest to be recorded in a pre or post nuptial agreement. This will give protection in cases where the available resources excluding the trust interest are sufficient to meet the reasonable needs of the other spouse.
It is also important to be aware that trust assets will often be treated as non-matrimonial property and therefore excluded from sharing.
Conclusion
On family breakdown the court must consider a whole range of possibilities and outcomes. It is possible to protect certain assets on family breakdown and it is therefore essential to consider all potential options to protect assets. On entering into any family relationship but particularly in the case of marriage, it is crucial to consider protecting assets as far as is possible in order to cover all life events from the start of the relationship to its end including divorce and even death.
At Cohen Family Law, we help you understand your options early and think ahead – because sensible planning is empowering, not pessimistic. We believe that being prepared means staying in control if life changes.
