Protecting Ltd business in divorce
Discussion
Hi there
My wife and I are shortly to begin divorce proceedings. To start with a bit of context, wife has left me after 3 years of marriage. She walked out as she felt we have drifted apart and she is no longer in love with me. She is 27 with a good full time job and has roughly £70k in savings from an inheritance last year. We own a house together with approximately £100k equity in between us.
I am 30 with my own business, started last year in April 2016. It's a consultancy business for myself with no other employees, though is structured as a Ltd company. Last years' accounts reported a net profit of £50k, paid me salary and dividends of £30k with £18k left in the business carried forward to this year. I do not have any savings at present as all went into house purchase and renovations and funding my living during the early days of me working for myself.
I understand that the business itself would be considered an asset of our marriage but I am keen to do what I can to protect it if possible given I have no other savings. It exists as an income stream for me, and I don't think that my wife would try and claim against it, however nothing would surprise me now so I guess i'm just looking for a bit of advice if there's anything I can do? Someone mentioned placing the business into a trust but I am unsure if this is possible.
Any observations or advice from a third party would be welcomed as i'm not sure how strong or weak a position i'm in at the moment - or what would be considered fair if it were to go all the way.
My wife and I are shortly to begin divorce proceedings. To start with a bit of context, wife has left me after 3 years of marriage. She walked out as she felt we have drifted apart and she is no longer in love with me. She is 27 with a good full time job and has roughly £70k in savings from an inheritance last year. We own a house together with approximately £100k equity in between us.
I am 30 with my own business, started last year in April 2016. It's a consultancy business for myself with no other employees, though is structured as a Ltd company. Last years' accounts reported a net profit of £50k, paid me salary and dividends of £30k with £18k left in the business carried forward to this year. I do not have any savings at present as all went into house purchase and renovations and funding my living during the early days of me working for myself.
I understand that the business itself would be considered an asset of our marriage but I am keen to do what I can to protect it if possible given I have no other savings. It exists as an income stream for me, and I don't think that my wife would try and claim against it, however nothing would surprise me now so I guess i'm just looking for a bit of advice if there's anything I can do? Someone mentioned placing the business into a trust but I am unsure if this is possible.
Any observations or advice from a third party would be welcomed as i'm not sure how strong or weak a position i'm in at the moment - or what would be considered fair if it were to go all the way.
It has been suggested but she is not willing to sadly. The issues are lengthy and not appropriate for this particular thread.
Tragic I know. Believe me I have tried and gutted that it has come to this - genuinely can't believe it but I have an incredible support network around me who seem to be pushing me through this!
Tragic I know. Believe me I have tried and gutted that it has come to this - genuinely can't believe it but I have an incredible support network around me who seem to be pushing me through this!
There was another thread where JulianPH posted some insightful stuff - worth seeking out.
In essence, relatively short marriage with no kids. Each should seek to be put back in the same position as when they started. So I reckon everyone gets out what they put in, with the surplus split 50/50.
That would seem fair and sane.
In essence, relatively short marriage with no kids. Each should seek to be put back in the same position as when they started. So I reckon everyone gets out what they put in, with the surplus split 50/50.
That would seem fair and sane.
991_tom said:
Hi there
My wife and I are shortly to begin divorce proceedings. To start with a bit of context, wife has left me after 3 years of marriage. She walked out as she felt we have drifted apart and she is no longer in love with me. She is 27 with a good full time job and has roughly £70k in savings from an inheritance last year. We own a house together with approximately £100k equity in between us.
I am 30 with my own business, started last year in April 2016. It's a consultancy business for myself with no other employees, though is structured as a Ltd company. Last years' accounts reported a net profit of £50k, paid me salary and dividends of £30k with £18k left in the business carried forward to this year. I do not have any savings at present as all went into house purchase and renovations and funding my living during the early days of me working for myself.
I understand that the business itself would be considered an asset of our marriage but I am keen to do what I can to protect it if possible given I have no other savings. It exists as an income stream for me, and I don't think that my wife would try and claim against it, however nothing would surprise me now so I guess i'm just looking for a bit of advice if there's anything I can do? Someone mentioned placing the business into a trust but I am unsure if this is possible.
Any observations or advice from a third party would be welcomed as i'm not sure how strong or weak a position i'm in at the moment - or what would be considered fair if it were to go all the way.
Hi OPMy wife and I are shortly to begin divorce proceedings. To start with a bit of context, wife has left me after 3 years of marriage. She walked out as she felt we have drifted apart and she is no longer in love with me. She is 27 with a good full time job and has roughly £70k in savings from an inheritance last year. We own a house together with approximately £100k equity in between us.
I am 30 with my own business, started last year in April 2016. It's a consultancy business for myself with no other employees, though is structured as a Ltd company. Last years' accounts reported a net profit of £50k, paid me salary and dividends of £30k with £18k left in the business carried forward to this year. I do not have any savings at present as all went into house purchase and renovations and funding my living during the early days of me working for myself.
I understand that the business itself would be considered an asset of our marriage but I am keen to do what I can to protect it if possible given I have no other savings. It exists as an income stream for me, and I don't think that my wife would try and claim against it, however nothing would surprise me now so I guess i'm just looking for a bit of advice if there's anything I can do? Someone mentioned placing the business into a trust but I am unsure if this is possible.
Any observations or advice from a third party would be welcomed as i'm not sure how strong or weak a position i'm in at the moment - or what would be considered fair if it were to go all the way.
I am very sorry to hear what you have been through. You have already received some very good feedback here and I shall try and assist as best as I can with the information at hand.
Firstly, you are actually in quite a strong position based upon the short length of the marriage, her inheritance, her job and the fact she left the family home (if it had been you who had left it may be another story altogether).
You (or your solicitor) would argue that your business is no more than a formal structure to contain and account for your self employed work, ergo you are self employed within this shell and it is no more of an asset as her work is. This is a highly persuasive argument and one a court would likely consider a pragmatic and reasonable conclusion.
The house situation will have more to it than I am aware of now. Did you both contribute equally to the deposit?
The inheritance would not automatically be deemed outside of the marital assets as it was received during the marriage. Courts do tread carefully in awarding part of an inheritance but as you state you have no savings and she has £70k then I consider it to be very relevant. It may also be material that the independence she considered the inheritance granted her could have been influential in her decision to leave so early into the marriage.
Was this inheritance always solely in her name or was it ever in a joint account? This can be important.
What is it she is actually wanting from you? It seems very inequitable for her to demand half the equity in the property and yet retain 100% of her savings when you have none. I can't see a court going with this.
Taken at simple face value (though these things never are that simple) you are now left, presumably, with a marital home that was funded from two income streams and now needs to be funded by yours alone or sold. Either of these two options will represent a cost to you that is not of your making.
Therefore, to offer to split the assets 50/50 (including her savings) would result in you paying her £15k for a clean break settlement (which you want and should insist upon) and this could actually be seen as being quite generous,
Your starting point should be that you have no savings, now have to individually fund a mortgage taken out by two people and are also self employed (within a limited liability shell).
Her starting point should be positioned that shortly after receiving as significant inheritance she walked away from a short marriage, her responsibility to service the joint mortgage (I presume), has £70k of savings in the bank and a good full time job.
The court has to take into account the needs of both parties (i.e. not just her) and it is not beyond the reach of a half decent advocate to persuade the court that the person with the greater needs in this matter is yourself, rather than your wife.
Don't get me wrong, I am not suggesting you will come out of this with any net gain and whilst I am going on your positioning of the headline figures, the devil is always in the detail.
I hope that provides some help at this point though. Finally, who is instigating the divorce proceedings, you or here? Given she has the greater wealth and arguably the greater financial security there may be some advantage in you being the claimant and her being the respondent. Having said this it usually makes little or no difference when it comes to ancillary relief (money) settlement in these days of no fault divorce.
Perhaps you are best to put something to her along the lines of what I have highlighted above (in a very calm way, perhaps via email) and factor in the costs of selling the marital home and the additional cost of you having to service the entire mortgage until this happens and see if you can reach agreement between each other before you embark on represented legal proceedings that could easily run into five figures.
Strengthen your position if she wants to instruct solicitors by asking her to pay your legal costs and provide interim maintenance towards the mortgage payments. You are highly unlikely to get either, but it will have a sobering effect on any wild ideas her and her solicitor may have at outset.
Please excuses the typos above, I had to keep coming back to writing it between working!
My key advice is to get the positions laid out as you want them (along the lines above) before you do anything. This enables you to start on the front foot and her on the back foot. Her solicitor will no doubt promise her the moon (if it does go that far) but if you can set expectations realistically before she seeks legal advice then this will shape how she presents the case to her solicitor and this is in your favour greatly.
You want her solicitor to see an abandoned husband with no savings having to service all of a joint mortgage whilst being self employed together with a wife who inherited £70k and walked out of a short marriage with a good full time job to support her. If this is her solicitor's first impression it may guide the handling of the matter differently.
If this is the district judge's first impression then it will also help greatly. So do everything you can to make sure it is as either way it can't hurt!
All the very best.
My key advice is to get the positions laid out as you want them (along the lines above) before you do anything. This enables you to start on the front foot and her on the back foot. Her solicitor will no doubt promise her the moon (if it does go that far) but if you can set expectations realistically before she seeks legal advice then this will shape how she presents the case to her solicitor and this is in your favour greatly.
You want her solicitor to see an abandoned husband with no savings having to service all of a joint mortgage whilst being self employed together with a wife who inherited £70k and walked out of a short marriage with a good full time job to support her. If this is her solicitor's first impression it may guide the handling of the matter differently.
If this is the district judge's first impression then it will also help greatly. So do everything you can to make sure it is as either way it can't hurt!
All the very best.
JulianPH - thank you so much for the incredibly detailed and comprehensive response. I really appreciate it.
There is another level of complexity that I left out of my initial post that I will mention now as reading the detail of your response it is probably very relevant.
The house was funded 35% (me), 35% (wife), 30% her parents. The reason being, at the time, with her parents input it helped us achieve a much better mortgage rate and a further step up the ladder into a better house that was supposed to last us further into our future. The split is outlined in the mortgage deed.
For our parts, my wife and I both put the same deposit in for the mortgage, her parents put cash down and that was seen as additional deposit. The idea being that come sale time, her parents would take their 30% out at current value, and we would use our equity to fund the next home. Regardless, the property has increased in value and the circa £100k I outline above is just for our 70%.
Being honest, I can't see her parents wanting to kick up much of a fuss about this, however a sale will be necessary as it will be difficult to fund the purchase of the whole house myself, nor do I particularly want to.
May I just ask where the £15k from me to her is calculated? I'm trying to get my head into the numbers but not sure on that one (apologies!)
Thanks again.
There is another level of complexity that I left out of my initial post that I will mention now as reading the detail of your response it is probably very relevant.
The house was funded 35% (me), 35% (wife), 30% her parents. The reason being, at the time, with her parents input it helped us achieve a much better mortgage rate and a further step up the ladder into a better house that was supposed to last us further into our future. The split is outlined in the mortgage deed.
For our parts, my wife and I both put the same deposit in for the mortgage, her parents put cash down and that was seen as additional deposit. The idea being that come sale time, her parents would take their 30% out at current value, and we would use our equity to fund the next home. Regardless, the property has increased in value and the circa £100k I outline above is just for our 70%.
Being honest, I can't see her parents wanting to kick up much of a fuss about this, however a sale will be necessary as it will be difficult to fund the purchase of the whole house myself, nor do I particularly want to.
May I just ask where the £15k from me to her is calculated? I'm trying to get my head into the numbers but not sure on that one (apologies!)
Thanks again.
991_tom said:
JulianPH - thank you so much for the incredibly detailed and comprehensive response. I really appreciate it.
Julian will give you some cracking detailed advice but note the devil really is in the detail.How was the gift from the in-laws given to you? Was it given to her specifically or given to both of you?
My brother was in a position where he was given the money to buy a particularly pleasant flat. The way the gift was done meant that a few months later when his girlfriend left she ended up with half the flat and he had to sell. For a quick settlement she took less than half but it was still a massive shock.
Personally I couldn't do it and would be leaving with my knapsack, but everyone is different.
desolate said:
Julian will give you some cracking detailed advice but note the devil really is in the detail.
How was the gift from the in-laws given to you? Was it given to her specifically or given to both of you?
My brother was in a position where he was given the money to buy a particularly pleasant flat. The way the gift was done meant that a few months later when his girlfriend left she ended up with half the flat and he had to sell. For a quick settlement she took less than half but it was still a massive shock.
Personally I couldn't do it and would be leaving with my knapsack, but everyone is different.
It wasn't gifted. They put the cash into the house and are listed on the mortgage even, it was factored as part of the deposit. Between us, we have the informal agreement as outlined above - that on sale of the house, each party takes their share out at value. They should profit about £16-17k from the sale at current value. It wasn't gifted presumably because her father is relatively smart and insulated himself from a messy breakup such as this, which leads me to believe the house sale will be fairly black and white.How was the gift from the in-laws given to you? Was it given to her specifically or given to both of you?
My brother was in a position where he was given the money to buy a particularly pleasant flat. The way the gift was done meant that a few months later when his girlfriend left she ended up with half the flat and he had to sell. For a quick settlement she took less than half but it was still a massive shock.
Personally I couldn't do it and would be leaving with my knapsack, but everyone is different.
My wife hasn't actually said what she hopes to get from the divorce - I am on the front foot here. To be honest, it's not like her to even consider anything such as this as she is in the fortunate position of not having to worry too much about money thanks to the bank of dad.
Sorry also just to answer Julian's other question - the inheritance was never in a joint account, only directly into her account.
991_tom said:
JulianPH - thank you so much for the incredibly detailed and comprehensive response. I really appreciate it.
There is another level of complexity that I left out of my initial post that I will mention now as reading the detail of your response it is probably very relevant.
The house was funded 35% (me), 35% (wife), 30% her parents. The reason being, at the time, with her parents input it helped us achieve a much better mortgage rate and a further step up the ladder into a better house that was supposed to last us further into our future. The split is outlined in the mortgage deed.
For our parts, my wife and I both put the same deposit in for the mortgage, her parents put cash down and that was seen as additional deposit. The idea being that come sale time, her parents would take their 30% out at current value, and we would use our equity to fund the next home. Regardless, the property has increased in value and the circa £100k I outline above is just for our 70%.
Being honest, I can't see her parents wanting to kick up much of a fuss about this, however a sale will be necessary as it will be difficult to fund the purchase of the whole house myself, nor do I particularly want to.
May I just ask where the £15k from me to her is calculated? I'm trying to get my head into the numbers but not sure on that one (apologies!)
Thanks again.
Firstly, thanks for the comments Stephen, you are absolutely right to highlight the devil is always in the detail.There is another level of complexity that I left out of my initial post that I will mention now as reading the detail of your response it is probably very relevant.
The house was funded 35% (me), 35% (wife), 30% her parents. The reason being, at the time, with her parents input it helped us achieve a much better mortgage rate and a further step up the ladder into a better house that was supposed to last us further into our future. The split is outlined in the mortgage deed.
For our parts, my wife and I both put the same deposit in for the mortgage, her parents put cash down and that was seen as additional deposit. The idea being that come sale time, her parents would take their 30% out at current value, and we would use our equity to fund the next home. Regardless, the property has increased in value and the circa £100k I outline above is just for our 70%.
Being honest, I can't see her parents wanting to kick up much of a fuss about this, however a sale will be necessary as it will be difficult to fund the purchase of the whole house myself, nor do I particularly want to.
May I just ask where the £15k from me to her is calculated? I'm trying to get my head into the numbers but not sure on that one (apologies!)
Thanks again.
OP, I am trying to get my head around the house situation.
If I understand it correctly you and your wife both put down 35% each towards the deposit and her parents put down 30% of the deposit.
Both parties receive 100% of any increase in the equity of the property (on a pro rata basis) so I would assume both parties service the mortgage debt on the same pro rata basis. However, I am guessing this may not be the case and you and your wife services all of the mortgage between you (and now you alone).
That may have been equitable whilst you were together, but it is certainly not so now if you are servicing 100% of a mortgage on a property that you effectively have a 35% interest in the equity.
If this is the case then it helps your interim position tremendously (though has no impact on the ultimate position).
How is are the property deeds and mortgage structured, are you tenants in common or joint tenants (I mean all three parties, not just you and your wife)?
I am just looking at liability here.
It sounds like you may also be worrying about problems that don't exist here if she has no money worries, holds no grudges and has wealthy supportive parents. It may even be the case that you should start a dialogue with her father, telling him you are obviously inexperienced in all this, shocked and upset things didn't work and simply ask for his assistance to close matters quickly so that everyone can move on with there live with as little stress and cost as possible.
He may appreciate such an approach and your gentlemanly respect for his daughter even though it is her that is putting you through this.
Legal battles are never the best way of reaching resolution.
Sorry if I have missed anything here, when I get another minute I will read back and factor in any other responses.
Hi Julian
So with the house - her parents put in 30% of the house value when we bought it (just under £70k), as cash. My wife and I then put a further £20k in (£10k each), meaning a total deposit of just under £90k, the remainder being mortgaged. Her father is on our mortgage as tenants in common with the split as follows:
Myself - 35%
Wife - 35%
Her dad - 30%
The agreement being that my wife and I service the mortgage, and her parents have no involvement whatsoever in the day-to-day running of the house, we were responsible for any upgrades, maintenance etc. It was merely support in the early days for us to help us get a step into a much better house, while at the time both of our incomes were relatively low. Therefore for the value of the house now, our mortgage is especially low - which has allowed us to overpay more recently.
I do agree with you in that I am potentially worrying more than I should - I can see that her father would be reasonable and amicable and coming from a financial background himself, I know he will want to keep costs and stress to a minimum.
In the interim, I am happy to pick up the costs of the mortgage until a sale is agreed.
So with the house - her parents put in 30% of the house value when we bought it (just under £70k), as cash. My wife and I then put a further £20k in (£10k each), meaning a total deposit of just under £90k, the remainder being mortgaged. Her father is on our mortgage as tenants in common with the split as follows:
Myself - 35%
Wife - 35%
Her dad - 30%
The agreement being that my wife and I service the mortgage, and her parents have no involvement whatsoever in the day-to-day running of the house, we were responsible for any upgrades, maintenance etc. It was merely support in the early days for us to help us get a step into a much better house, while at the time both of our incomes were relatively low. Therefore for the value of the house now, our mortgage is especially low - which has allowed us to overpay more recently.
I do agree with you in that I am potentially worrying more than I should - I can see that her father would be reasonable and amicable and coming from a financial background himself, I know he will want to keep costs and stress to a minimum.
In the interim, I am happy to pick up the costs of the mortgage until a sale is agreed.
Sorry, the £15k settlement was based upon you both having combined matrimonial assets of £170K (£100K equity and £70k savings) and splitting these in half (£85k each) which would have led to you paying her £15k - so when added to her £70k she had a total of £85k in cash and you had the same in equity.
I said this was generous as her cash had no cost to realise but selling the property to access the equity comes at a cost, is not instant or guarantees and you have to service the debt until this is achieved.
In reality you can only ever split assets properly after all of this has been taken into account and done. Life though, doesn't tend to work like that.
I said this was generous as her cash had no cost to realise but selling the property to access the equity comes at a cost, is not instant or guarantees and you have to service the debt until this is achieved.
In reality you can only ever split assets properly after all of this has been taken into account and done. Life though, doesn't tend to work like that.
991_tom said:
Hi Julian
So with the house - her parents put in 30% of the house value when we bought it (just under £70k), as cash. My wife and I then put a further £20k in (£10k each), meaning a total deposit of just under £90k, the remainder being mortgaged. Her father is on our mortgage as tenants in common with the split as follows:
Myself - 35%
Wife - 35%
Her dad - 30%
The agreement being that my wife and I service the mortgage, and her parents have no involvement whatsoever in the day-to-day running of the house, we were responsible for any upgrades, maintenance etc. It was merely support in the early days for us to help us get a step into a much better house, while at the time both of our incomes were relatively low. Therefore for the value of the house now, our mortgage is especially low - which has allowed us to overpay more recently.
I do agree with you in that I am potentially worrying more than I should - I can see that her father would be reasonable and amicable and coming from a financial background himself, I know he will want to keep costs and stress to a minimum.
In the interim, I am happy to pick up the costs of the mortgage until a sale is agreed.
Hi Tom(?!)So with the house - her parents put in 30% of the house value when we bought it (just under £70k), as cash. My wife and I then put a further £20k in (£10k each), meaning a total deposit of just under £90k, the remainder being mortgaged. Her father is on our mortgage as tenants in common with the split as follows:
Myself - 35%
Wife - 35%
Her dad - 30%
The agreement being that my wife and I service the mortgage, and her parents have no involvement whatsoever in the day-to-day running of the house, we were responsible for any upgrades, maintenance etc. It was merely support in the early days for us to help us get a step into a much better house, while at the time both of our incomes were relatively low. Therefore for the value of the house now, our mortgage is especially low - which has allowed us to overpay more recently.
I do agree with you in that I am potentially worrying more than I should - I can see that her father would be reasonable and amicable and coming from a financial background himself, I know he will want to keep costs and stress to a minimum.
In the interim, I am happy to pick up the costs of the mortgage until a sale is agreed.
That makes much more sense now, they didn't put down 30% of the deposit, but 30% of the actual sale price. This explains fully as to why they are not contributing towards servicing the debt as they have no debt to service!
I believe that if you put the home on the market, everyone took their rightful share and walked away with a clean break consent order and no other funds changing hands everyone will be happy and that would be a very stress free way of moving forward.
The only alternative that I can currently see (with the information disclosed) is that you could pursue your share of her £70k savings. I would advise against this for two reasons; (1) the legal costs would simply eat away at this and (2) it is simply not worth the time and stress in my experience.
If you speak with her father and offer the first option you can resolve this very quickly and I believe he may actually assist in this for his daughter's sake and in recognition of your stance.
It is looking more and more the case that any other approach would be futile from her/their side. She is the one who has more to lose than you (with the exception of the devil in the detail - as always!).
One caveat, you should not leave the marriage with less than you brought in (under the circumstances you have given). Given the equity increase it does not appear this would be the case anyway.
If I were you I would just resolve it now and move on. Chalk it up to a lucky escape and start your life again.
Sell your 30% to dad n daughter for cash, negotiate the mortgage capital repayment back to you on top of the 30%. walk away with the cash.
that is the smart move here. get daddy to see the big picture...small mortgage for babygal to take over your 30%, you leave the inheritance alone, no lawyer fees, independant roof over daughters head.
sell this to him, collect the cash, walk away.
that is the smart move here. get daddy to see the big picture...small mortgage for babygal to take over your 30%, you leave the inheritance alone, no lawyer fees, independant roof over daughters head.
sell this to him, collect the cash, walk away.
desolate said:
Julian - I am sure you are a lovely the bloke judging by your various posts but I really hope I never see you on the other side of the table should I be involved in any legal matters in the future.
Nowt worse than the other side having a lawyer who knows his onions!
Stephen - I'll take that as a compliment but you have no worries. Unless we are drafting terms for a contract in the financial sector or (more likely) are having a beer we are unlikely to be on the other side of a table! Nowt worse than the other side having a lawyer who knows his onions!
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