It is difficult if you are getting divorced or are contemplating separating from your husband or wife, to answer the question “Can I give property to my relative?’’. On the one hand, you do not want your marital troubles to affect your decision to give money or property to a relative. On the other hand, you do not want your actions to appear as if you are deliberately trying to give assets away so your husband or wife will not be able to make a financial claim against the asset in any subsequent divorce and financial proceedings.
Our Manchester divorce solicitors acknowledge that it is a tricky issue. What can be a genuine gift to a relative can be perceived as a clever ploy to reduce a divorce financial settlement. In other cases, a gift of property or money to a relative can easily be seen as a clumsy attempt to try to defeat a spouse’s financial claim. Take the case example of a husband transferring his share in a property investment portfolio to his wealthy brother, the week before the husband leaves his wife. If a husband or wife wants to make a claim against the property given away to an elderly or impoverished relative, the spouse can be viewed as greedy. Take the case example of a wealthy husband and wife, where the husband paid for his parent’s council home so his parents could own their own home and have security.
There are many examples of where either a husband or wife has given money to a relative, only to find that their spouse challenges the gift in later divorce financial proceedings. Take the real life case of lawyer, Melanie Panzone and her former husband and banker, Jonathan Read. He bought a holiday apartment in Panama for £300,000. Fair enough, you might think. However, ownership of the apartment was put in his mother’s name. Mr Read said it was a thank you for all his mother had done for him.
A family judge ruled that Mr Read beneficially owned the apartment. This meant the asset was brought into the equation in the divorce financial settlement. Mr Read’s mother disagreed with the ruling of the first and second family law judges. She has appealed the decision to the court of appeal. If the court of appeal agrees with Mrs Panzone’s mother in law, then the holiday home apartment may be transferred back to her.
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Property division in divorce: Can I give property to my relative?
The case of Mrs Panzone and her ex-husband, Mr Read, and Mrs Panzone’s mother-in-law demonstrates what can happen if you give money or property to a relative, even if the transaction takes place prior to the breakdown of the marital relationship.
Our Manchester divorce solicitors recommend that if you are contemplating a separation or are already going through divorce proceedings that you take expert legal advice before giving property or money to a relative. That is because if the gift is thought, by your ex, to be a device to reduce the size of their financial settlement, they could ask the court to set aside the property transfer and your relative could be invited to intervene in the divorce financial proceedings. That can add to the cost and the complexity of the financial proceedings.
Sometimes giving money to a relative whilst in the midst of divorce proceedings is the best way to resolve a financial impasse with your husband or wife. If you are not able to reach an agreement over whether a spouse should receive £x or £y as their financial settlement, the solution may be to give the difference to the adult children to fund a house deposit or to pay off part of their mortgage. After all, you may find with a bit of communication between husband and wife that they both planned to help their adult children with a lifetime gift.
The key to successfully giving property to a relative is to:
- Take legal advice before making the gift – this applies whether or not you are contemplating a separation at the time that money or property is given away;
- Discuss your plans to give property to a relative with your spouse and other key family members;
- Record the agreement and the basis of the transfer of property to the relative – although the record of the agreement will not mean that your spouse cannot challenge the transfer it is evidence of the rationale behind the gift;
- If you are concerned that your spouse might challenge a large gift of money or property to a relative or the transfer of a large part of wealth into a discretionary trust then take legal advice on the option of a post nuptial agreement. The agreement could simply record that your spouse accepts that the transfer is a genuine gift to your relative or could be more wide ranging and set out how your remaining assets will be divided between you if you later decide to separate or divorce. A postnuptial agreement is just part of sensible estate planning, in the same way as making tax efficient lifetime gifts to relatives or making a Will.
For legal help with financial settlements and divorce, for help in intervening in financial proceedings or for advice on drawing up a postnuptial agreement please contact us