Or so the saying goes. However, from a legal standpoint when your child marries you may prefer love to be accompanied by a suite of documents to ensure the family assets are protected for future generations. This is of particular importance where a family business is involved.
Careful planning, both on your part and that of your children, is beneficial to their marriage to ensure lifetime tax planning is effective and that the family business can continue to run smoothly should the marriage end in divorce.
Many parents provide assistance for their children in the early stages of their adult life, for instance to assist in the purchase of their first home, or to help with school fees for the grandchildren. When giving assets, it is possible to do so either outright, or by way of a trust.
If assets are given outright, control over those assets will be lost and, if your child later divorces their new spouse, those funds will be taken into account.
However, if assets are instead passed into a trust, an element of control can be retained; this can help ensure the funds are used for the purposes desired. While trust structures are helpful, they do not provide complete protection if your child were to divorce, as the court may take into account how the trust has been managed during its existence. There are various forms of trust and our advisers can assist you in setting up the right one for your family requirements.
If there is a family business it is sensible to discuss the hopes and plans for the business with the family members who are involved at an early stage. In most circumstances, a family constitution will be drawn up, to outline the business’ plans and ambitions for the future, setting out an express, agreed strategy to achieve them.
A family constitution can assist a smooth transition as the business passes to the younger generation and it can make provision as to whom is capable of succeeding to the business (either on divorce or death). It can also set out what rights can be passed to spouses and any ownership transfer restrictions, which can be helpful if a relationship breaks down.
Pre-nuptial agreements are entered into before you marry. Certain conditions must be met to ensure that the court will consider that the agreement is fair. If the court considers the agreement to be fair, it is more likely to be upheld in any court proceedings thereby reducing the likelihood of a successful challenge to the agreement. It is imperative that legal advice is obtained at least six to eight months before your child is due to marry.
Post-nuptial agreements are entered into during the marriage. The agreement sets out the financial provision provided for upon divorce. Post-nuptial agreements can be varied by the court. It is preferable to enter into a pre-nuptial agreement. However, if that has not happened, it is worthwhile considering a post-nuptial agreement.
If your child is considering cohabiting with his/her partner it is worthwhile entering into a cohabitation agreement. A cohabitation agreement sets out the financial basis upon which the cohabitation takes place. This minimises the risk of any claims being made against your child. Such agreements can however be varied by words or actions and it is extremely important that proper legal advice is obtained. Again, ideally, your child should seek advice at least six months before cohabiting with their partner.
While lifetime planning is beneficial, it must be paired with the preparation of a will. That document may leave everything outright to an individual or it may provide the assets be held on continuing trusts so your trustees can consider how best to deal with your estate, as at the date of your death, taking into account the position and circumstances at that time.
Everyone should have a will and, if your children have been sensible and had one prepared, they should note that a will is revoked by marriage (unless it is prepared in anticipation of marriage). Therefore, if there is an existing will it should be reviewed and potentially revised ahead of the wedding.
Birketts can help with the preparation of all of these documents to ensure your family’s assets are safeguarded as far as possible. Please contact us for further advice or assistance.
The content of this article is for general information only. For further information regarding lifetime planning, please contact Susan Young or Emma Brunning. Law covered as at April 2016.