ROAD SENSE: FINANCIAL PLANNING, RELATIONSHIPS AND EDUCATION 

Published on 22 October, 2024 | Madelaine Hailey

Wouldn’t it be nice to know what the future holds?

We could order our lives with a little more certainty and avoid those things which aren’t so pleasant.

Yet not being able to predict what’s around the corner means that we have to make plans designed to protect ourselves and those closest to us.

It’s why we save money, set up pensions and take out insurance policies. That all seems like sound financial planning.

Occasionally, though, such planning can create conflict when loved ones develop very different ideas of how they wish to spend their lives.

As figures published by the Office for National Statistics (ONS) make all too clear, relationships are never certain.

Thirty-eight per cent of couples across England and Wales who married at the start of this century had already divorced by 2022 (https://www.ons.gov.uk/peoplepopulationandcommunity/birthsdeathsandmarriages/divorce/bulletins/divorcesinenglandandwales/2022).

A proportion of those may well have been among the increasing number of people drawing up pre- and post-nuptial agreements to help determine how they might divide their assets should their marriages not last the course.

Although still unpopular with some individuals, they arguably add some welcome reality to proceedings.

Without it, things can become complicated for spouses and for cohabitees as well.

Over the course of my career, I would say that is particularly true when people engage in financial planning without considering how it might be affected by the breakdown of a relationship.

It is a scenario of which I was reminded by media reports about a seven-year legal dispute between a businessman, Peter Andreewitch, and his former girlfriend, Magali Moutreuil (https://www.thetimes.com/article/459b0c6a-77ce-4c5b-9492-b090ad4eaa3e?shareToken=18ee336f9c63f55800741c47927089cb).

Mr Andreewitch owned a string of properties in the UK and Germany through an investment company but, during the course of a relationship lasting almost two decades until they split in 2017, he transferred all of the shares in the firm to Ms Moutreuil.

Over the course of several court hearings, he maintained that he had only done so to “shield” himself from potential creditors and that he did not intend his partner to be the lawful owner of the properties, including the £2.2 million London home where the couple had lived with their five children.

However, his claims have been rejected, with High Court Judge Nicholas Thompsell concluding that Mr Andreewitch has now effectively reached “the end of the road”.

He is not the only person who put assets in the name of a partner or spouse for various economic reasons, including minimising a potential tax liability.

Nevertheless, financial or professional planning of this sort done in isolation risks unforeseen and costly consequences should the personal relationship fall apart.

Whilst Mr Andreewitch and Ms Moutreuil were not married, another notable court ruling almost exactly a year ago demonstrated how such a situation impacts spouses (https://caselaw.nationalarchives.gov.uk/ewfc/2023/177).

In that case, a husband working in private equity transferred £6 million to his then wife for “tax saving reasons”.

When they divorced, he failed in his argument that all of the money should be treated as non-matrimonial.

The judge in that matter took into account the extent to which the wife’s “tax status has enhanced” what her husband brought into the marriage.

These issues have been given extra currency due to a project undertaken by the Law Commission on financial remedy (https://lawcom.gov.uk/review-to-examine-50-year-old-laws-on-finances-after-divorce-and-the-ending-of-a-civil-partnership/).

As my colleague Laura Guillon described in The Times newspaper, the Commission is due to report on its findings in December (https://www.thetimes.com/article/91128a5c-b78e-49dc-a2ef-e9fed7927bcf?shareToken=3983518ebbf7a1403c6b205ea97938e3).

It may ultimately lead to legislative reform but only relating to divorce, not cohabitation.

I would suggest, therefore, that the time taken for laws to change and the continued absence of protection for cohabitees makes it all the more important for couples to employ joined-up thinking when it comes to their finances, regardless of their marital status.

The transfer of cash or assets may be born of legitimate tax planning to reduce the sums which may be owed to HMRC.

However, whilst divorce is not necessarily as much of a certainty as death and taxes, it is far from uncommon.

When structuring one’s finances around those close to you – whether a family or business partner, spouse or child – it makes just as much sense to consult a family lawyer in order to explore the possible personal implications as it does to speak to an accountant or wealth manager.

Although couples in the first flush of romance might want to disagree, break-ups make apparent the fact that money and relationships are often intertwined.

It is surely better to be prepared and able to deal with whatever future life throws at you, than face a difficult present when it arrives.