Family Law Specialist

Nicola Williams Solicitor

Nicola Williams Solicitor

Cheadle, Stockport,
Greater Manchester

Family Law & Finances

Nicola Williams Solicitor

Nicola Williams Solicitor

financial family law for individuals and families

What is a clean break?

We say it a lot during divorce or dissolution proceedings. But what exactly is a clean break?

In fact, there are different types:

capital and income;

capital only;

deferred; and

‘on death’

They are all clauses found in a consent order, that bring certain types of claim to an end.

Let’s take a closer look.

Capital and income

This is typically what people think about when they say they want a clean break. It means no future claims can be made for either:

a share of your spouse/civil partners income in the form of maintenance; or

re-distribution of capital or pension entitlement by way of a lump sum payment, a property adjustment order or a pension sharing order.

Capital only

If spousal maintenance is part of your agreement (or the court orders it), there is an ongoing financial relationship between you.

Therefore, the court cannot remove your right to make another application. (You might need to alter the amount of maintenance, for example).

The court can however, still order that neither spouse/partner may make further claims for lump sum, property adjustment, pension sharing or pension attachment.

This type of order is called a capital only clean break.

Deferred

Often, spousal maintenance comes to an end after a fixed period of time.

With this in mind, court orders usually contain a deferred, income clean break clause, that will kick in as soon as the maintenance ends.

‘On death’

If you are married, you have the right to make an application for reasonable financial provision out of your spouse’s estate when they die.

Although many people expect divorce to terminate those rights, in fact you don’t lose them until you remarry.

Therefore, it is usual to see a clause in a financial order removing any rights to bring a claim against a former spouse’s estate.

This type of clause is known as a clean break ‘on death’. It cannot be used if there is ongoing maintenance, but can be deferred like the income clean break.

Summary

There you have it; a clean break can be immediate or deferred. It can be for capital, income or inheritance.

It is a clause in a court order that prevents future claims of a particular type.

If you would like help with a financial agreement or court order on divorce, use the form below to get in touch.

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How to have a complete clean break on divorce

Family Law & Finances

Nicola Williams Solicitor

Nicola Williams Solicitor

financial family law for individuals and families

What is a beneficial interest – and other family law terminology

What is a beneficial interest? Is a living together agreement the same as a cohabitation agreement? What is a property adjustment order? What does it all mean?

Family law is complicated enough. So here’s a list of the most common phrases you may come across (what is a beneficial interest?) together with their usual meaning, their purpose and anything they’re also known by.

TermMeaningPurposeAlso known as
Ancillary reliefOrders that may be made by a court ancillary to (in addition to) the main proceedings. Most often used to refer to maintenance and property orders at the end of a divorce.To re-distribute assets and income at the end of divorce, dissolution or nullity proceedings.
Financial provision, maintenance, lump sum order, property adjustment order, pension sharing.
Beneficial interestThe right to benefit in/from an asset. Often the right to live in, or share the profit from, a property without legally owning it.To avoid issues where the legal ownership of an asset does not (or cannot in the case of children) reflect who is really entitled to some or all of the rights in it.Equitable interest.

Beneficial owner.

(See Tenant in Common below)
Clean breakAn order that removes the right to make future claims for income or capital.To bring an end to claims for financial provision on divorce or dissolution of civil partnership.Order for financial provision.
Cohabitation agreementAn agreement in writing between two or more people living together in a property.To prevent unintended changes to the beneficial ownership of property, caused by living together and sharing bills and other living costs.Living together agreement.
Consent orderA court order that is made with the agreement of all parties and the judge.To make an agreement legally binding.
Or:
To agree steps to be taken at any stage in court proceedings.
Agreed order/agreed financial order.
FDAShort for First Directions Hearing.Orders made to prepare the case for hearing. E.g. production of documents, valuations etc.First Directions Hearing.
FDRShort for Financial Dispute Resolution hearing.A stage in court proceedings when a judge provides input to help the parties negotiate a settlement.Financial Dispute Resolution Hearing.
Joint tenantsTwo, three or maximum four owners of property who own an undivided share in it.Property automatically redistributed to the surviving owner(s) when one dies without needing probate or administration of an intestacy. Often the way married couples own joint property.Joint tenancy
Legal and beneficial joint tenants
Property adjustment orderAn order to transfer property or an order to settle property (hold it on trust)To provide a home for a partner or spouse or childTransfer of property order. Mesher order.
Martin order.
Tenant in commonA joint owner of a property with a separate beneficial interest from the other owner(s)To allow a share in property to be sold or passed on by will.Beneficial owner in equal shares or unequal shares.
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What is a beneficial interest?

What is a beneficial interest – and other family law terminology What is a beneficial interest? Is a living together agreement the same as a cohabitation agreement? What is a property adjustment order? What does it all mean? Family law is complicated enough. So here’s a list of the most common phrases you may come …

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Family Law & Finances

Nicola Williams Solicitor

Nicola Williams Solicitor

financial family law for individuals and families

Claiming a share of a partner’s property

Claiming a share of a partner’s property is possible if you have either

made a financial contribution; or

have been promised a share and have acted to your own detriment in relying on that promise.

This article focuses on situation where only one partner owns the property.

If you want to know about unequal shares in property you own together, look at my page on deed of trust.

claiming a share of a partner's property a house made of bank notes

Title deeds and ownership

Every transfer of property in England and Wales must be registered with the Land registry.

The official register will be updated to show the new legal owner/s and details of any mortgages, restrictions and so on.

Beneficial ownership

The legal title to a property often isn’t the full picture.

A property (or a share in it) can be owned legally by one person on behalf of another.

Here’s an example:

Claire and Peter want to buy a flat together.

Claire has had some credit issues in the past and the mortgage lender wants to impose a higher interest rate as a result. They say they will review this in 12 months.

Peter, on the other hand, can raise enough mortgage to buy the flat on his own salary and with a better rate.

Claire and Peter both have £10,000 in savings. They are both working and intend to pay the mortgage equally.

They go ahead and buy the flat in Peter’s sole name. Claire pays her £10,000 to Peter and he pays the deposit in full.

The title deeds only show Peter as the legal owner. But Claire and Peter have a verbal agreement that she will be entitled to half of the equity when the property is sold.

Peter assures Claire that she has a share in the property. Claire believes Peter’s assurances and continues to pay half of the mortgage.

Their agreement is not in writing. There is no written declaration of trust. But nevertheless, Claire can claim an interest in the property.

Financial contributions to family life may still count towards a share of property

Unmarried couples often pool their resources in a similar way to couples who are married.

For example, one might pay the mortgage whilst the other pays for childcare or holidays. They often don’t keep accurate records of who has paid for what.

It can be difficult to distinguish between payments described as ‘rent’ and contributions towards the mortgage that are intended to give the payer a share in the equity.

People are often unaware of the legal rights and obligations that may be evolving over time. The best way to avoid problems is to have a living together agreement.

Family law and unmarried couples

Misunderstandings are common and many couples expect there to be a general type of family law that protects them if a relationship breaks down.

There is, unfortunately, no family law legislation that specifically deals with unmarried couples who live together.

The rules and laws that apply to this type of situation whilst people are alive, are general property and contract laws.

The courts do their best to interpret these laws in a way to achieve fairness for couples who fall out. And the first thing that they will always look for is any documentary evidence of an agreement.

Without a written agreement, such as a deed of trust, it can be very difficult to prove who owns what.

This can be stressful and very expensive if you go to court.

Providing for an unmarried partner if you die

The rules of intestacy apply after death without a will and there is no provision in them for an unmarried partner.

In limited cases a claim can be made under the Inheritance (Provision for Family and Dependents) Act.

If you want to be sure you have provided for your unmarried partner, make a will.

Claiming a share of a partner’s property through court proceedings.

Claiming a share of a partner’s property through court is a last resort.

Disputes between families are stressful and destructive.

The outcome may be uncertain, and it can take a year or more to conclude.

However, there may be times when you feel you have no choice.

If you are reading this and want to find out where you stand, get in touch and I will let you know whether I can help.

Citizens Advice

You can find out more about the difference between living together and marriage on the Citizens Advice website.

They recommend that you have a living together agreement. A cohabitation agreement is the same thing.

For advice on living together agreements or claiming a share in a partner’s property, get in touch and I will see whether I can help you.

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Family Law & Finances

Nicola Williams Solicitor

Nicola Williams Solicitor

financial family law for individuals and families

Keeping the family home after a divorce

keeping the family home after divorce

Keeping the family home after a divorce is a big topic and I’m not going to try and cover everything in one article.

I’m going to focus in this short article on a fairly typical scenario where you’ve agreed that one of you will stay in the house with the children. You’ll keep it in joint names, sell it when they grow up, and then split the proceeds.

In this particular case, I’m also going to look at what happens when a new partner moves in and why it’s so important to consider that possibility at the outset, often well before a new relationship even begins.

Reasons you might not want to sell the family home after divorce

First of all, let’s look at why you might want to keep the family home in joint names after a divorce.

Divorce is very tough emotionally both for adults and children. Staying in the same house can be a reassuring constant at a time of upheaval and change.

Moving house might mean moving school or make it difficult to commute.

There may be financial advantages in keeping the house. If there is a mortgage penalty that can be avoided, for example, by not selling. Or a saving made on estate agents fees, stamp duty on a new home and so on.

It might simply be the only option. If the main carer of the children can’t afford a mortgage or rent on their own, sticking with the existing arrangement might be the only or cheapest solution.

Reasons a spouse/parent might object to keeping the house in joint names after divorce

For the departing spouse/parent, visiting their children in what was once the family home can add to any frustration or distress at no longer being a united family.

One party won’t be able to access their capital. Realistically, they may also not be able to afford another mortgage and have to rent or live with family.

Capital gains tax might be paid on any increases in value of their share of the property.

Overall, they may feel trapped in a financial and emotional arrangement that prevents them moving on with their lives.

Balancing everyone’s needs – parents and children

Whilst it’s true that children’s needs come first, that doesn’t necessarily mean that we should ignore the needs of the adults in the family.

Keeping the family home in joint names after divorce is usually a last resort unless both parties agree to it.

Unless there is a lot of cooperation between you, the problems of keeping your finances tied together usually outweigh the disadvantages of selling the property.

However, if any of the following apply:

one spouse would find it impossible to rehouse elsewhere;

there are dependent children who could not be rehoused elsewhere;

the property is also a business (e.g. a farm); or

the property was inherited over many generations;

then a court might be more inclined to order that the property remains in joint names and that the sale is postponed.

This can be for a fixed period, for example until children grow up or until refinancing is possible . It can also be indefinite.

Whether you have a financial agreement or court order, it will almost always say that if the spouse/parent living in the house remarries or cohabits, this will trigger a sale.

That is usually the starting position anyway. The court’s permission might be needed if there are also children in the house. And here’s why.

Is the family home still needed for the children

In the vast majority of these situations, the reason you didn’t sell the family home was because you decided your children needed to carry on living there.

So, the first question you need to ask yourself is – has that need changed?

Maybe it has. Maybe it’s been a couple of years since the divorce and the children are older (teenagers perhaps, about to go to university) and it would be less difficult for them to move on now if they had to.

But if their needs haven’t changed, what then?

Can the house still be sold? That depends.

Can the ‘parent in residence’ afford the mortgage on their own?

Leaving the new partner out of it for a moment, it’s worth just mentioning that the spouse/parent in residence could have a very different/improved financial position a year or two after the divorce.

If that’s the case, they may well be able to buy out the other parent at this stage without help from a new partner.

But what if they can’t. What if their income and capital is just the same as it was? Should we expect the new partner to help out?

Asking a new partner to buy out the ex

Most people who decide to remarry, understand that this will have an impact on any previous divorce settlement. It’s common for the new partner to help take over the mortgage and buy out the previous spouse.

But sometimes that doesn’t happen. Usually it’s because they can’t afford to.

Can you force your ex-spouse’s new partner/spouse to buy you out of the family home when they move in?

No. That’s the simple answer. Whilst morally people may think they should at least try to, they don’t owe you anything legally. And what’s more, you will find it difficult to stop them moving in, even if you are still paying some of the mortgage.

That’s often a very unsatisfactory situation. So what can you do about it?

Forcing a sale of the family home

If your ex-spouse remarries and they carry on living in your jointly owned house without trying to buy you out, you can usually activate the sale clause in the agreement or court order.

The court has to consider the welfare of the children first and foremost, but beyond that has to try to sever the financial ties between the original spouses. This will usually end in a sale unless one spouse can now buy out the other.

What to consider before entering into an agreement to keep the family home after a divorce

No matter how well you get on, financial ties after divorce can be problematic.

Make sure you take professional financial advice before entering into an agreement.

Explore all mortgage options. Can the departing spouse obtain a mortgage elsewhere?

Limit your agreement to the shortest time possible – whether that is a year or two or until the children leave university.

Be realistic about new partners coming into your lives and the emotional response you might have when that happens.

Think about the long term. Will you be able to pay for structural repairs? How will you cope of interest rates change?

Discuss the practicalities of selling if one of you is ill or redundant or dies.

Check insurance policies. Whose name are they going to be in. Read the terms and conditions. Are there any requirements for the policy holder to live in the property.

Consider capital gains tax. A properly drafted agreement or court order will limit capital gains tax. A verbal or informal agreement won’t.

Make a will. Inheritance tax is payable if either spouse dies during the term of the agreement. Make sure your will takes into account the complexity of the agreement.

Finally

There’s a lot to weigh up and discuss when thinking about whether to keep the family home after a divorce.

Take professional legal as well as financial advice. If you can work together and there’s no conflict of interest, you can both use the same solicitor.

Make sure all your legal paperwork is done properly if you want to minimise your tax burden in the future and know exactly where you stand when the time comes to sell.

If you want to discuss these issues and your personal circumstances in more depth, give me a call on 020 3384 1977 or fill in the form below to make an appointment.

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Family Law & Finances

Nicola Williams Solicitor

Nicola Williams Solicitor

financial family law for individuals and families

Why you need a cohabitation agreement

Living together? Buying a home or a car? Taking out a loan?

You need a cohabitation agreement. They’re straightforward, affordable and can save you a fortune.

What is a cohabitation agreement

Sometimes known as a Living Together Agreement, a cohabitation agreement is a basic contract/agreement between couples about the property they own.

Typically, a cohabitation or living together agreement will:

Identify the shares you each have in your home (sometimes this is to confirm that one of you has no share in the value of the property);

State whether contributions to living costs will entitle either of you to a share (or a greater share) in the value of the property;

List any other significant jointly or separately owned property or assets (e.g. a car) and the shares you each have in them.

A more detailed cohabitation agreement will set out your intentions if one of you dies.

For example, you might want to ensure that your partner is able to continue to live in your home. This may be until they have another relationship or die or it could be for a fixed period of time.

How a cohabitation can save you money

If you are putting a deposit down on a house/flat purchase, itis vital that you record the share it is buying in your home.

If you don’t have a legally recognised document, you might lose some or all of your share of the equity if

one of you dies;

your partner gets into debt; or

you split up.

The laws on joint ownership of property are very strict. There are no special laws for cohabiting couples.

If you buy a property jointly with another person, it is very important to accurately record your share and your agreement about paying the mortgage and insurance.

It’s your most important asset and it’s easy to protect. Don’t risk losing any of it.

Tax

A cohabitation agreement can help save you tax in many ways.

Whether it is in relation to additional rate stamp duty, capital gains tax or income tax, having an accurate, legally recognised record of your financial relationship will help.

Affordable legal help

A straightforward agreement has to be affordable for everyone, not just the rich.

It also has to be right for you. It has to do the job you want it to do.

Don’t be tempted to download a generic DIY document because it’s ‘free’ or cheaper than getting a new front door key cut. The chances are it won’t be worth the paper it’s printed on.

All legally binding contracts/agreements have to be properly drafted to be legally binding under English and Welsh law.

Fortunately, the cost of protecting yourself and your property typically starts at around £240 including VAT for a straightforward declaration of no interest in property. A standard cohabitation agreement starts at £360 including VAT. And a more detailed agreement with a floating declaration of trust starts at £600 including VAT.

Fixed Fees

A cohabitation agreement (also known as a living together agreement) is a fixed fee service. After an initial free consultation, I will send you a fixed fee quote.

Summary

Cohabitation agreements are legally binding documents, setting out shares in property for unmarried couples.

It is an affordable and sensible way to avoid losing part or sometimes all of your equity in a jointly owned property when you live together.

There are often tax advantages in being able to prove what you own (and what you don’t own).

To find out how I can help you decide whether you need a cohabitation agreement, use the form below to get in touch.

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cohabitation agreement tied together

How to avoid higher rate stamp duty with a deed of trust

Higher rate stamp duty isn’t always payable on second homes.

Exemptions and reliefs apply but in order to make full use of them, you will need to be able to prove that you are not legally liable.

This is where a deed of trust is often very useful.

Tax - when is additional stamp duty payable

When is higher rate stamp duty payable?

Higher rate stamp duty is usually payable when you buy a second property in England or Wales. It is not payable when you replace your main residence.

Who pays the tax?

The new owner(s) of the property are liable for the tax.

Tax is usually due within 14 days of completion of the purchase.

However, a legal owner/purchaser and a true owner are not necessarily the same person.

When a legal owner/purchaser and the true owner aren’t the same – a bare trust.

The purchaser is also known as the ‘legal owner’ or the ‘proprietor’. Their name is recorded on the proprietorship register at the land registry.

But in fact, it is quite common for the purchaser or legal owner to have no interest in the benefit or value of the property itself.

They are owners in name only. The property is registered in their name but belongs to someone else.

This type of situation is known as a bare trust.

The legal owner is a trustee in these circumstances. The true owner is called the beneficiary under the trust or the ‘beneficial owner’.

Owning or buying a property on behalf of someone else.

There are many reasons why this happens.

Someone without the mental capacity to manage their money, may need help buying a home;

Children under 18 cannot be registered as legal owners of property;

A divorced couple may have an agreement that a property in joint names only really belongs to one of them;

Parents of adult children may need to be on the title deeds because they are also on the mortgage but don’t want a share in the property.

Exemption where the legal owner has no beneficial interest in the property.

In principle, if you own more than one residential property on completion day and you are not replacing your main residence, higher rate stamp duty is payable.

However, if you aren’t really the true owner (i.e. you have no beneficial interest in the new property at all), higher rate stamp duty is not payable.

Using a deed of trust to prove the true ownership

The TR1 land registry form transfers the legal ownership.

If the legal owner is not the beneficial owner, you will need to specify this in a separate document, known as a deed of trust.

This deed can also set out other agreed terms.

How much money can you save?

Higher rate stamp duty is 3% of the total value of the property. This is on top of existing stamp duty payable. So, if the property sale price is £300,000, the rate will be 3% up to £250,000 and 8% on the balance, making the total payable £11,500.

If higher rate stamp duty isn’t payable, the calculation is no stamp duty up to £250,000 and 5% on the balance. That is a total payable of £2,500.

Therefore, if you need to demonstrate that you are not the true owner of the property, a deed of trust could help you save £9,000 in higher rate stamp duty.

If the true owner is a first time buyer, there will be no stamp duty payable if the purchase price is £300,000.

You can find more details on higher rates of stamp duty here on the gov website.

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Nicola Williams is a Family Law Solicitor in the AFG Law Family Team at Cheadle Royal Business Park, Brooks Drive, Manchester, Cheadle SK8 3TD