Family relationships must be taken into account when structuring finances

Amid families’ increasingly complex marital situations, advisers must take a client’s family relationships into account to avoid costly mistakes.

Jane Cowley, Partner at law firm Gateley, has warned that, just because two people may live together, have the same surname and share children, it is essential not to assume they are officially married, as this could have an impact on finances.

Speaking at a recent Chartered Institute for Securities & Investment conference, Ms Cowley said it was essential that advisers were clear on “family dynamics and relationships” and warned that “awareness of family law and an awareness of financial and tax implications in the event of relationship breakdown” was critical.

With a 30 per cent increase between 2004 to 2014 in the number of cohabiting families, according to Office for National Statistics figures, this has become the fastest growing family type in the UK. However, contrary to popular belief, there is in fact no such thing as ‘common law marriage’ in the UK, and it is wrong to assume that unmarried couples in a long-standing relationship have acquired rights similar to those of married couples.

Ms Cowley therefore says it is essential that advisers encourage their clients who are living together without marrying to create “living together agreements” which sets out who owns what and how these assets will be dealt with should the relationship end.

The ‘Bank of Mum and Dad’, where parents or grandparents use their money to buy a house for their children or grandchildren, is another factor to consider when reviewing a family’s financial structure. Often this money is given as a gift, but this leaves the parents with little control in a relationship breakdown.

“A loan can always be forgiven,” Ms Cowley explains. “If you have nothing in place and it is a gift you can’t even raise the argument in court, but if it is a loan you can at least raise the argument.”

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