Family & Divorce Partner, Katie O'Callaghan provides expert commentary in The Sunday Times looking at the following scenario...
Q: I bought our house before we got married and now we are getting a divorce — do I get to keep it? I am getting a divorce from my wife of 30 years and business partner for as long. She moved into a home I bought while we were dating, which is the address we built our shared business from. She will be moving out and staying with relatives nearby. We don’t have any children.
The divorce is reasonably amicable so we’ll continue to run our business from home for the time being before she eventually resigns. I’m worried that to have the funds to give her half the value of the business the court may force me to sell the house. This is the house I bought with money I’d made before we started the business, so I feel it should be protected during the asset split.
Equally, it would be difficult to run the business from another premises because this is one of the few houses in the area that has an outbuilding of its size. We have a number of sunk costs in the outbuilding. Is there anything I can do to protect myself?
Family & Divorce Partner, Katie O'Callaghan says:
Equality is the start point for the division of wealth on divorce, particularly after a long marriage. There are ways to depart from a 50-50 outcome — for example, if some wealth was acquired before you lived together. However, the family court treats the marital home as central to family life, and it is more difficult to protect than other premarital assets.
It will depend on what other assets you have as to whether you can avoid a sale. The need to run the business from the property will be relevant, although your wife may assert that you could downsize. Ultimately the court will want to know that your wife can rehouse in a suitable property of her own. A sale could be avoided if there are other available resources such as cash or investments that could be used to raise a deposit to enable your wife to buy a new home. It would therefore be worth you considering what funds you could raise from other sources (for example, by selling investments held in portfolios or cashing in ISAs) to buy out her interest rather than selling and dividing the proceeds. This outcome would avoid the cost of estate agency fees and the need for each of you to pay stamp duty on a new property.
As for the business, while the court has the power to order a sale, that really would be the last resort. It will look for ways to preserve the business, particularly if it has generated an income for you both that is required in the future. However, it would want to cut your financial ties from one another if possible. The focus would be on the liquidity within the business to buy out your wife’s interest; that could be over a period of time. Her ability to generate her own income in the future would be another factor.
Given that relations are reasonably amicable the ideal outcome would be to negotiate a financial settlement without court proceedings — perhaps with the assistance of lawyers or a mediator.
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