Will my family get their money back if I divorce my spouse?

Financial proceedings in divorce can be stressful and at times complex, especially when it comes to unravelling arrangements involving third parties. There may be loans or gifts from parents, friends, or other family members that require consideration when determining a financial settlement. These third-party interests may be at risk during divorce, however there are things for you to consider and steps you can take to try and protect them.

Establish what the third-party arrangement is

It is important to understand the nature of the third-party arrangement in your particular circumstances. Loans or gifts from parents are commonly used to support a couple’s financial situation, for example, when purchasing a property, family car, or funding a business venture. Recognising whether the financial contribution is a loan, or a gift will assist in the first instance in determining whether the third-party interest can be protected, primarily as gifts are not repayable.

Gather supporting documentation

Having clear documentation can assist in establishing whether a third-party arrangement is legitimate, and what the intentions and expectations of the third-party might be. This can include pulling together copies of any loan agreements, signed documents containing promises to repay a sum of money (known as promissory notes), gift declarations, or any other written evidence that outlines the terms and conditions of the financial arrangement.

It is also important to identify the assets or funds originating from the third-party arrangement, and if possible, keep it separate from joint matrimonial assets so there is a clear distinction as to what the third party’s contribution is, and what is not. Keeping thorough and accurate records of transactions, bank statements, and other financial documentation may assist with this, and help to establish the third parties’ claim over their contribution.

Consider a prenuptial or postnuptial agreement

A prenuptial agreement entered into prior to a marriage, or postnuptial agreement entered into during a marriage may help to add another layer of protection to third-party interests. These agreements outline the division of assets and financial responsibilities of each party in the event of a divorce. By addressing and acknowledging third party arrangements and setting out a clear intention for them to be treated separately within the agreement, this can provide clarity which may assist in the event of a dispute later down the line. While prenuptial and postnuptial agreements are not strictly binding, so long as specific legal requirements are met, then it is likely to be upheld by the court.

Seek legal advice

If you need help with any of the issues mentioned, visit ejcoombs.co.uk or email enquiries@ejcoombs.co.uk.

Find EJ Coombs’ other columns here.

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