When you read the title, I expect most of you immediately thought of toddlers confused that daddy doesn’t live with them anymore, or grumpy teens passing judgment on the parent(s) they ‘hate’. But I don’t mean either this time.
In this post, I will be exploring family law issues involving adult children – both as ‘splitters’ themselves and as the offspring of separating parents.
Thirty pieces of silver
Society changes and increasingly we family lawyers work with ‘silver splitters’ who are separating later in life. This later-life separation often happens when couples who managed to trundle on when one or both were out at work, but who then find themselves struggling when retirement takes away that respite, leaving them to cooperatively occupy their home and get along. Their adult children have usually left home by this point, so there is no longer any need to ‘stay together of the sake of the children’, as the old maxim had it.
People sometimes refer to this situation as ‘empty nest syndrome’.
Of course, many unhappy couples decide to separate without that wait, but increasingly family lawyers find that we are dealing with people nearer the end of their working life than the start. This brings to the fore a particular set of issues which are different to those of younger couples.
Once children have grown into adults the law may have only limited regard for them, but they remain an important consideration within families, both emotionally and practically.
Pots of gold
It is probably not energy-effective to chase the end of a rainbow in the hope that a leprechaun has left his pot unguarded and out in the open. It is more likely that rainbow’s end is with the couple’s pension trustees.
One particular problem to be resolved is income on retirement. After years of service, people may have earned defined benefit pensions where their years of employment entitle them to an ongoing income of a percentage of their earnings – a ‘final salary’ scheme which is commonplace for those in public service. Doctors, nurses and other medics usually have such pension arrangements and the benefits can be considerable over a long career, even if NHS pensions administrators usually take an age to formally confirm what those benefits amount to, and even then, they are not always correct. That significant capacity for error has led some pension experts to specialise solely is checking NHS figures – so that part of the wider NHS may or may not have deserved clapping during the covid lockdowns. The wait for pensions information from the NHS is not one of the published waiting times which politicians are so fond of quoting and it never hits the news headlines. It does however cause difficulties for separating couples and their advisers.
Outside of public service, the most common private pension arrangement is the defined contribution scheme, otherwise known as a ‘money purchase’ scheme under which a fund is gradually accumulated and then used to buy an income or invested in some other way. People may not be able to touch that fund (although at time of writing 55 is the magic age for that) but the value of the fund is certain and people can usually log on and find the amount in their pension pot.
Even when couples both work, it is unusual for pension income to be similar and during the marriage there are often informal plans about how retirement is expected to be funded. Separation smashes those expectations.
Death and taxes
Whilst prolific Bostonian Benjamin Franklin is often cited as the originator of the 1789 sentiment that nothing is certain in life except death and taxes, Londoner Daniel Defoe had it in print earlier – in his Political History of the Devil of 1726. So two writers who remain important outside of the classroom both penned what is now a truism.
With humans expiring an inevitability, even the most loving of children are obliged to recognise that their parents will eventually die and so part of their future financial planning may include inheritance. Great Expectations they may not be, but honest couples will consider what difference their probable inheritances will make to their resources when the inevitable occurs. Money does not replace people, but it often follows human loss and some couples will have considered how that inheritance will be used, as undesired as it may be.
Losing a parent is one of life’s most stressful times, and many couples experience difficulties in their marriage within a year or two of a parent dying, even if that event is not accompanied by a change in wealth (because the other parent or step-parent is still alive, for example).
The law does not ring-fence inheritance on divorce. On a human level it is often thought ‘morbid’ or ‘greedy’ to consider inheritances, as ‘need’ is the highest placed factor in deciding how matrimonial assets should be allotted. But if the money (or property) exists and remaining assets will not meet all reasonable needs, that inherited wealth must be considered.
If parents of adult children wish to do so, they can skip a generation with their wealth and leave it to their grandchildren to avoid it being fought over as the matrimonial property of their child. All that is needed to do so is a Will, but will writers usually suggest that any such decision should be properly discussed beforehand.
Taxes follow from death and tax-planning is outside the scope of these musings, but do note that leaving money to children or grandchildren will have tax implications. An accountant will be able to explain the ramifications.
It is certainly worth considering the options if a person with wealth is elderly or has health issues and their offspring has a shaky marriage. When I worked as a mediator, inheritance was something that I would discuss. Many separating couples were prepared to acknowledge that an inheritance should be looked at outside the general matrimonial assets. Sharing sometimes still occurred, but that acknowledgement made the emotional pain of parting with family money more tolerable. My experience is that people can behave decently, even when they are suffering the loss of a parent and the turmoil of a separation.
No plan survives first contact with the enemy
Helmuth Von Moltke got it right: in later life, the enemy is time. The world just doesn’t run smoothly and even good plans rarely anticipate all eventualities. Holiday plans can be destroyed by a pandemic, a strike, a business failure or even a war (thank you for that unwelcome addition to the list, President Putin). Holidays are usually planned just weeks or months ahead, but retirement plans carry many more risks as they begin many years before the event planned.
There may not be any choice to make when it comes to which partner is going to concentrate on amassing a pension for the couple to use in retirement. If one spouse is going to devote time to childcare, then it is probable that their earnings and capacity to amass a pension will be less and the ‘breadwinner’, of whatever gender, will have those pension rights in their name. For an unmarried family, that fact leads to considerable unfairness as a pension is presently not able to be shared on separation, despite any informal agreements that may have been made when times were happier.
For the last two decades, the law has allowed pensions to be shared on divorce. Prior to that, that they would remain in one spouse’s name and be ‘earmarked’, but that could leave the poorer spouse vulnerable.
Imagine, for example, a police officer who gets divorced. They then subsequently lose their pension following disciplinary action against them. I once dealt with exactly that kind of case: a police divorce where the (former) officer misbehaved to such an extent that his pension was taken as part of the punishment. If that pension had been earmarked, it would have been lost for both halves of the couple, even though that loss would have been the fault of one spouse only. Sadly, in another police divorce I handled, before introduction of pension sharing, the officer died in an traffic accident, and so his ex-wife had no automatic entitlement to death benefits.
The replacement for earmarking, pension sharing orders, can transfer pension rights and some funds to the other spouse, so both have a share of the income that they had expected to live on together in retirement.
The law regards maintaining the home and childcare as valuable contributions to a marriage, so while one spouse may feel they ‘earned’ the pension and should keep it, that is rarely the outcome the law expects. As with inheritance, pension rights are a resource to be applied in divorce to meet reasonable needs.
You’re not my real Dad/Mum: re-marriage after divorce or separation
In long marriages, there are very few exceptions to the full sharing of resources such as pension rights. But if the couple came into the marriage later in life after they had amassed their wealth, and the marriage was consequently short, then more regard can be paid to the sources of the funds and also to any agreements they may have reached.
The best way for a couple to protect their resources is for them to enter into a pre-nuptial settlement, which sets out which assets each brought to the marriage and how they have agreed to divide them if they separate. This applies especially to couples with adult children.
I say ‘especially with adult children’ because one factor which often crops up when advising people is the feelings of those individuals. If those children fear that the new step-parent is going to takie away their probable inheritance then there will be hostility. I have had people seek advice about protecting their resources driven by concerns about their adult children’s attitude, rather than suspicion of their intended spouse.
When a spouse brings in family wealth – for example money earned by the floating of a family company or a concentration of inheritances – then there can be pressure on them from the family not to dissipate that wealth through divorce. It is common for a spouse with money they are not familiar with controlling to go on a spending spree or to otherwise use the money rashly. Running into the arms of a ‘gold digger’ or ‘adventurer’ creates the risk of that wealth being lost to the family. I have seen many financial agreements in which parents with money set out precisely how they will protect the family-origin money so that their children will eventually benefit.
Usually, the nomination of death benefits and the writing of wills is involved. But children can also enter a pre-nuptial or living together (cohabitation) agreement if they plan to set up home with somebody – particularly if that person has fewer resources.
Hard-working ex-husbands generally find toy-boy replacements annoying, even if the latter are motivated by genuine affection and not the wealth that may be handed over on divorce. The impact of the latter can be addressed.
It does not seem unreasonable to protect wealth for the children of the family, provided such arrangements are discussed openly and the solutions fair. I have advised many clients looking to reduce the likelihood their family wealth will fall prey to an avaricious partner in the aftermath of separation and divorce.
You can’t kid a kidder (unless you can)
Many years ago, I had a client who persistently denied she ‘had somebody else’. At court, as part of the overall settlement, she accepted a five-figure lump sum in substitution for lost spousal support rights, claiming she could never bring herself to remarry after the trauma of her husband’s betrayal.
Two weeks later she was married to a galloping major of a suitor. The situation turned out to be similar to the film Dirty Rotten Scoundrels when it transpired that each had developed the inaccurate impression that the other was wealthy and they had then effectively ‘conned’ each other into a whirlwind wedding.
When all this came to light, the ex-wife lost all credibility, so when fraud was asserted by her ex-husband, we negotiated for a rebate for the ‘lost’ spousal rights compensation. She was fortunate that her ex-husband left the remainder of the generous settlement in place and did not ask a judge to start again, knowing that she was deceitful, dishonest and motivated solely by hard cash. Despite his ex-wife having already sold her story to the tabloids, the husband seemed to accept her protestations of trauma at the breakdown of the marriage and his previous infidelity.
The lesson to be learned here is: protect your resources by having a formal agreement. If done correctly, this will enable you to have some confidence the court will respect your assets. ‘Direct access’ barristers (which can be instructed directly by clients) represent the best value for such agreements, so we direct clients to such specialists when that is their chosen route.
Advice for family members
Adult children can be a source of worry as separating spouses, and they can also be bystanders in their own parents’ divorce.
What can be done to help them?
The biggest gift that you can give a family-member going through relationship troubles is your time. Lawyers are a pricy second choice if talking a situation through with friends and family has not worked out.
When listening, remember that you are unlikely to be told the full story – the situation may be worse than they describe or it may be that their perceptions are making the situation seem worse than it really is: you cannot usually know.
If there are children of the relationship, remember that you might need to act as a buffer between the parents and offer the children a safer space, away from their parents’ conflict. That ‘honest broker’ intermediary role is far more difficult if you have nailed your colours to the mast in unquestioning support for your relative. Even when you hear both sides of the story, you still might not get anything that resembles the objective truth, so it is wiser to avoid too much comment and condemnation, especially if your knowledge of the situation does not come from direct observation. Holding back comments you might want to make is not easy, but it can put you in a situation where you will have a better chance of being trusted, something which is particularly important if you have a role in dealing with the children.
All that takes time.
The gift of lending
Parents are sometimes willing to make loans of part of their pension funds or other wealth. At other times, adult children have done well and wish to help their parents financially.
Whilst loans within a family will not often be scrutinised or questioned, it is prudent to keep a record of what you give, the purpose for which it was advanced and whether it is a repayable loan or a gift. If a loan is given – either during the marriage or after the family member separates – it is not a legal requirement for there to be a formal agreement, but it is prudent to be clear and to set out in what circumstances it will becomes repayable.
‘Legal aid’ – financial support for legal representation – has largely been abolished in family law, so funding proper legal advice and representation is a very helpful way to support your relative. You can specify when any loans are repayable and keep a record of payments made. Loans could become a debt to be respected as part of the formal divorce settlement, but to have any chance of that, there needs to be credible evidence that the debt was treated as real and valid by both the lender and the person who received the money.
In a previous blog, I discussed where a father ran into problems after buying a property for his son and the latter’s family to occupy.
Here at Major Family Law, we are not regulated to advise on taxation issues, so we recommend seeking the advice of somebody suitably qualified, but as a general rule, when buying property in similar circumstances, it will be right for the property to be in the names of the couple sometimes, and on other occasions it will not be.
Having a trust deed which proved the real owner of the property saved my client from losing his investment to his erstwhile daughter-in-law. But such deeds are not always possible – as false ‘gifts’ may amount to mortgage fraud if the couple borrow as well as use family money to fund the purchase of a property.
Whether the lender will accept that their borrowers have ‘non-commercial’ debt as well as a formal commercial mortgage is something that ought to be checked. Often parents sign to say money is a ‘gift’ even if, ultimately, they expect it to be repaid when circumstances allow.
Those ‘gift’ declarations/ forms/ letters can have long term consequences, even though everybody was fully aware of the source of the funds and what the expectation really were. It may be worth formally setting down expectations if you are calling money towards a property ‘a gift’. If you do so, remember to say who is liable for the repayment, so that the obligation lays where it ought to.
If you are using money or other resources to support a parent, or family member, it’s prudent to be open with your spouse. In separations people sometimes deny knowledge of loans or ‘understandings’ about property. They may try to grab resources truly owned by third parties – for example, parents, children or other family members.
Courts decide on evidence, so it is important that there is both a paper trail for the money and evidence of intent. If a spouse challenges the relative and loses, they can be liable for reimbursement of legal costs in a way that is not the norm in family finance cases. Those costs can sometimes wipe out a massive chunk of the settlement.
Ordering the payment of costs can mean a spouse no longer has enough to meet their needs. But in one recent case, the court held that some ‘itigation misconduct- such as denying a loan was repayable or claiming property owned by a third party – was too serious to overlook. It would, the court declared, give people a license to misbehave if they did not face such consequences for that kind of behaviour.
So, openness and integrity are important when helping family members. Whichever way the funds may flow – young to old or old to young – it is worthwhile getting the right documents in place to reduce the chance of arguments later.
There is much more to say about how family members can help rather than hinder, but for now, I hope thee few points are thought-provoking and of some practical use.
Lewis Hulatt joined Major Family Law in 2016 as a consultant working with clients in both the south east and the north of England. In addition to his many years of experience as a solicitor, Lewis is a trained mediator and often advises on how to resolve disputes outside the courtroom.