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A recent survey revealed that a quarter of couples do not feel comfortable discussing money with their partner, many blaming: never finding a good time, feeling a little embarrassed or never knowing how their partner might respond, as reasons for avoiding the subject.

It also found that 18% of people were more likely to move in together before they talk about money and as many as one in 10 expects to marry before they bring up the topic of finances with their partner. 

This reluctance, however, will not stand you in good stead when determining who owns what if you decide to separate or divorce.

The amount of information you might want to share about your finances will depend on where you are in your relationship and what your intentions are, but if you are looking to move in together and perhaps going on to marry, talking about money early on will set the groundwork for a trusting relationship.

Be honest from the outset

There is no set format for a divorce or a relationship breakdown. Every couple is as unique as are their backgrounds and circumstances. 

In our experience, however, we advise being open, frank and honest about finances from the beginning. If, for example, you have property from a first marriage that you want to retain, be clear and upfront about this with your partner.

If divorce or separation is on the cards, people can become very defensive. They can feel aggrieved, depending on the circumstances of the breakdown and can understandably become very protective about what they see as theirs.

Duty to disclose

In a divorce, there is a duty to give full and frank disclosure to each other and the court. This means that a husband and wife or civil partners need to be open and honest about their financial positions, to include their interests in property, other capital assets, income and pensions. They will need to disclose bank statements for the preceding year. Any assets worth more than £500, even those lying around at home, will need to be declared. 

If you are minded to hide any of your assets, even if this is done well in advance of the separation, you will most probably leave a paper trail.

We examine accounts and financial statements in forensic detail and are adept at identifying activity that does not add up and in locating assets that have not been voluntarily disclosed. Social media is also an increasingly useful tool for tracking down undisclosed assets.

Consequences of non-disclosure

Failing to disclose assets, or indeed misrepresenting them, has consequences. Should it later come to light that you failed to properly disclose assets or income, any financial agreement or court order can be ‘set aside’. 

There are also rules and serious consequences around trying to play detective yourself when it comes to finding out about your partner’s assets by accessing information and documents that are private and then using that material during divorce proceedings. Courts frown on this and regard it as a breach of confidentiality.

If you cannot reach a financial agreement, either directly, via mediation or solicitors, you can ask the court to make an order. Should a court order disclose assets not be complied with, there are consequences. These can include a costs order requiring the reluctant party to pay their partner/spouse’s legal costs, with the ultimate sanction being imprisonment.

Settlements in divorce must be fair

In a divorce, assets must be split fairly and according to need. The court’s overriding objective is to achieve fairness, to assess this, there must be an exchange of full and frank disclosure. This can be difficult to accept, particularly in an acrimonious divorce or separation, where emotions often run high.

Cohabiting couples are the fastest growing family type according to the Office for National Statistics, with one in eight people aged 16 and over in England and Wales now living together without being married or in a civil partnership. Dividing assets in such circumstances is a very different story.

What if you are cohabiting?

When cohabitees separate, only joint assets are considered when calculating a financial settlement and then it depends on how that joint property is owned.

If a property is owned by you and your partner as joint tenants, it automatically goes to the other partner when one of you passes away.

Property can be owned by two (or more) people as beneficial tenants in common, where you each own a specific share. We advise drawing up a declaration of trust which sets this out in black and white. Doing this will ensure that the asset is split according to the shares you have agreed.

It is worth carefully considering the issue of joint ownership. In our experience, many people do not understand the difference between the two. Where shared ownership is not documented, there are likely to be arguments.

Before moving in together, you might want to think about having a cohabitation agreement. This sets out what you intend to happen with your assets should you separate.

Pre-nuptial agreements

We might think of them as an American phenomenon associated with untrusting celebrities, but there is definitely a place for ‘pre-nups.’

They can be a sensible option if one of you has an exceptionally wealthy family or it is the second time around for marriage, and you have acquired your own assets, perhaps been through a messy break-up and already have children from your first marriage.

The best advice for entering into a cohabitation agreement or a pre-nup, is to both be upfront and transparent with what you own, otherwise, they might not be worth the paper they are written on.

If you need help with the financial aspects of divorce or separation to achieve a fair settlement, or you suspect that your partner has not been completely honest about their finances, our Family & Matrimonial team will be happy to assist you.

*The study was commissioned by M&S Bank and polled 2,000 adults in a relationship. The findings were published in February 2020.

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