Forsters’ Private Wealth lawyers featured in Legal Week’s Private Client Global Elite Directory 2022

• 31 January 2022
• News

Ten lawyers in Forsters’ Private Wealth team have been featured in Legal Week’s 2022 Private Client Global Elite directory.

Launched in 2017, the esteemed Global Elite Directory lists the world’s most respected lawyers advising High Net Worth clients, as nominated by peers within the private wealth industry. Each year the list is narrowed down to just 250 industry experts from over 6,000 nominations.

Private Client Global Elite

• Catharine Bell, Private Client
• Carole Cook, Private Client
• Emily Exton, Managing Partner
• Roberta Harvey, Head of Contentious Trusts and Estates
• Nick Jacob, Private Client
• Rosie Schumm, Family

Rising Leaders

• Patricia Boon, Private Client
• James Brockhurst, Private Client
• Dickon Ceadel, Family

Elite Recommends

• Neasa Coen, Private Client

The full directory is available to view here.

Asset protection considerations

• 20 July 2021
• News

When acquiring UK property, aside from seeking legal support on conveyancing, US purchasers should seek advice on the broader tax and legal implications. As with any substantial acquisition or investment, there will always be traps for the unwary. Where US purchasers are concerned, the traps can be more common and more dangerous. Taking advice from the outset will enable pro-active planning and help to avoid costly future mitigation.

Use of trusts

While the use of trusts to hold UK residential property can potentially offer some degree of asset protection when compared to outright personal ownership , this protection may not be as robust as clients would like.

In the event of a divorce, for instance, trust assets can be considered a financial resource available to the spouse who is a beneficiary (although this will depend on the terms of trust, distribution patterns, etc.) and the trust may even be treated as a “nuptial settlement” if it is settled by one or both of the couple, or by a third party for their benefit. If a court finds the trust is a nuptial settlement (which is comparatively rare but not unheard of) it will have extensive powers to change the terms of the trust, remove/replace trustees, order distributions, etc. This is in stark contrast to the position in the US, where trusts are generally robust and immune from variation.

The use of trusts might also be unattractive from a tax perspective. For instance, the value of the property would suffer an IHT charge of up to 6% every ten years while it was held in trust. The property would also continue to form part of the estate of the settlor (so be subject to IHT on his or her death) unless he or she was irrevocably excluded from benefit. Excluding the settlor from benefit is unlikely to be practical if he or she wishes to occupy the property. Furthermore, holding the property in trust would give rise to reporting obligations for the trustees, who would need to report the existence of the trust and details of its beneficiaries to HMRC through the Trust Registration Service.

As a result, there will only be very limited scenarios in which trust ownership will be appealing. Generally speaking, direct personal ownership will be the preferred route for the family home.

Protecting assets from separation or divorce

Nuptial agreements

A pre-nuptial or post-nuptial agreement offers the best degree of protection for UK property on divorce. Parties are able to define marital property (which is to be shared) and separate property (to be ringfenced) on divorce and can also set out levels of spousal and child maintenance payable on separation. Whilst prenups are not automatically enforceable in England and Wales, provided the agreement meets the parties’ respective needs, and those of any children, its terms will generally be upheld.

There are many reasons why people have a nuptial agreement, including;

• if there is an actual or expected disparity between the wealth of the spouses;
• there are assets which have been in one of the couple’s families for generations that they would like to protect on divorce, in order that future generations can benefit; and
• if it is not a first marriage and a party wants to preserve assets for children of a previous marriage.

The aim of nuptial agreements is to provide certainty and security if the marriage did breakdown, and more power to a couple to make arrangements for the future, rather than leaving everything to be determined by the court. Above all else, a pre-nuptial or post-nuptial agreement saves acrimony and potentially significant costs if there were a divorce in the future.

Pre-nups and post-nups will be familiar territory to many US connected clients, but there are some additional considerations and differences that they will need to be aware of on moving from the US to the UK. English nuptial agreements are not automatically enforceable like pre-nups in the US, but are instead guided by case law. This case law states that the starting point is that nuptial agreements will be upheld, but they must meet certain conditions including;

• the agreement been entered into freely;
• each party has taken independent legal advice;
• there has been full financial disclosure by both parties; and
• agreement is fair. This element of fairness is the second differentiator between UK and US pre-nups; if a US pre-nup is in place, it must satisfy the principles of fairness to be upheld in England.

It would be wise for any clients that are moving from the US to the UK to have their arrangements reviewed by a specialist English family lawyer and revised or supplemented, if necessary, to provide more robust protection against claims on divorce. Alternatively, if a nuptial agreement is not in place, a move to the UK or an investment in UK property may provide the impetus to negotiate a post-nup.

Cohabitation

There can also be a risk of claims against property on the separation of unmarried cohabitees. While there is no such thing as common law marriage in England and Wales (and the starting point on the separation of unmarried cohabitees is that neither party will have any ongoing financial obligations towards the other), there are a number of means through which one party can make a claim against the other with respect to property.

In England and Wales, cohabitation is a patchwork quilt of potential claims that can call on various different areas of law, including property, family, trust and children law, to make a claim. For example;

• Claims for the benefit of children – The court could make a settlement or transfer of property order, to provide a home for the child for their minority (NB: Any capital awarded to purchase a property is likely to be held in trust until the child’s majority or the end of full-time education, when it will revert to the payer).
• Trusts of land – One party may be able to rely on actions during the course of a relationship (e.g. conversations, oral agreements, regular payments towards outgoings in relation to the property etc.) to establish a beneficial interest pursuant to an implied, resulting or constructive trust. The latter is most relevant in the domestic context. Alternatively, a party can rely on proprietary estoppel to claim a beneficial interest.

They must show:

• an assurance on the part of the other party (e.g. leading them to believe they will have some right in relation to the property)
• that they relied on the assurance to their detriment; and
• that it would be unconscionable for the other party to deny them the right they expected to have.

Cohabitation agreements can protect against these risks. They allows parties to regulate the terms of their cohabitation, providing clarity both during the course of the relationship and in the event that it should break down.

The agreement would incorporate or be accompanied by a declaration of trust in relation to any real property, confirming the parties’ respective beneficial interests. The agreement can also deal with a wider range of issues, including how household expenses are to be split; what happens if one party wishes to sell the property and the other does not; financial support during and after cohabitation; and living arrangements and financial provision for children.

Security and clarity of such a kind is extremely beneficial to a couple if the relationship breaks down in the future.

Buying and selling luxury residential property in a competitive market

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