As we know, relationships are complicated. People are getting married later – divorce and second marriages are more common. While protecting any assets in your own marriage may be something you would immediately think of – what about if you are assisting other family members?

Family finances are becoming more interlinked. The ‘bank of mum and dad’ has been increasingly helping children to purchase homes and invest in businesses where they cannot obtain help elsewhere. But what if your child gets divorced?

How this help occurs will vary from family to family. It could be a complete gift from the parents to their child, or a loan to be repaid at some point. It is important to consider whether it is appropriate to put something in writing recording the terms.

Take a gift to a child: if they subsequently divorce the gift is likely to be viewed as part of their matrimonial pot. Whilst reassuring noises may have been made during the marriage that the other half would not touch this money, one party cannot then claim that the gift is a loan, when the marriage has broken down. The courts will simply not accept those claims, although families frequently try.

But what if it is a loan? A loan needs to be evidenced in writing at the time so there can be no misunderstanding otherwise the court could consider it is a ‘soft loan’ which cannot be ring-fenced during the divorce.

Often, the longer the marriage is, the more interlinked the finances become and the more difficult it will be to separate any single asset out from the matrimonial pot. There will therefore be a risk that in dividing the matrimonial assets the court will apply the starting at the point of equality unless there is a clear written agreement.

How to protect the assets

Put simply: enter into a written agreement, whether by loan or marital agreement. Do so at the time, not later on. If it is a gift, how can this be protected? It is always worth taking legal advice before making a significant gift or payment to children, so that it can be protected if possible.

If you are making a gift, consideration should be given to a pre or post-nuptial agreement.

At any point during a relationship, even after a marriage, it may be worth considering entering into an agreement to regulate matrimonial finances. However, if you are either marrying or considering helping a family member, pre and post-nuptial agreements should be considered as a potential form of asset protection. As relationships change and evolve, it is sensible to revisit these agreements to make sure the terms are still relevant.