Author: Alice Carter

The number of high-net-worth couples that are choosing not to marry is becoming increasingly high. There is a widespread misconception that long-term cohabitation with your partner creates automatic legal rights. You might have heard of the phrase ‘common-law marriage.’ However, this title is simply a myth. As such, property disputes can become especially complex for wealthy unmarried couples and so it is important to be aware of the implications. This article will focus on the reasons why unmarried couples face these challenges, the types of property that can fall into dispute and ways these disputes can be resolved with a primary focus on TOLATA proceedings (Trusts of Land and Appointment of Trustees Act 1996).

Why do these disputes occur for unmarried couples

Unlike married couples, unmarried partners generally do not benefit from a legal framework that automatically governs how assets are divided when a relationship breaks down. You will have heard of the phrase ‘common-law marriage,’ which many people believe grants unmarried couples the same rights as spouses simply because they have lived together for many years. However, this is a complete misconception in England & Wales. People are often unaware that the separation of an unmarried couple is governed by different areas of law.

Instead, disputes between unmarried couples are determined under the ordinary principles of property and trust law and family lawyers often deal with cases under a piece of legislation called TOLATA. As such, legal ownership is crucial to these disputes. A partner who does not legally own the property may be able to establish a beneficial interest by demonstrating a common intention to share ownership and showing that they acted to their detriment in reliance on that intention. These are the type of proceedings that are bought under TOLATA.

For wealthy unmarried couples, these disputes can be complex. There can often be high value property portfolios, and other significant assets which have a complex ownership structure. Establishing who owns what and whether one partner has acquired an interest despite not being named on the title to that property, can often involve a lot of detailed evidence and analysis of the parties’ intentions and financial arrangements.

Types of assets often in dispute

The most common asset that unmarried couples argue over is the family home or other properties they have owned together or deem belong to both of them. When wealthy unmarried couples separate, disagreements can arise over a much wider range of assets. Residential property is often the most valuable asset and this can be the family home, a holiday home or an investment property portfolio. Questions could also arise over business interests, shares or luxury high-value items.

However, for the purposes of this article, I will be focusing on residential properties and TOLATA.

Properties – the family home or other residential properties

Real estate is often the most significant asset in disputes between unmarried couples, particularly where substantial wealth is involved. In England and Wales, the starting point is the title to the property which sets out the legal ownership and the presumption is that equity follows the law (i.e. the equitable ownership is the same as the legal ownership). Therefore, if the property is owned by only one partner, the other must establish a legal basis for claiming a beneficial interest. Some good examples of evidence which could be used to establish this are the financial contributions towards the purchase price, mortgage repayments or major renovations which have add capital value to the home.

Disputes often involve the family home, but also second homes and investment properties. These can often have complex ownership structures and can be of significant value which might require detailed analysis of financial records, or correspondence and the conduct between the parties throughout the entire relationship to demonstrate their intention as to the ownership of the property.

Steps to take before issuing TOLATA proceedings

Upon separation, the first step in these types of disputes is to try and agree with your partner the extent of your beneficial interest in the property and the subsequent financial provision you should receive from it.

TOLATA claims are heard in the civil courts rather than the family courts. As such, there is strict procedure to follow before issuing a court application. These can be found by reference to the Civil Procedure Rules and the accompanying Pre-Action Protocol. To give an overview, you should firstly write to your partner to see if matters can be agreed outside of court. If their response is not forthcoming, you need to serve them with what is called a ‘Letter before Action.’ This is a comprehensive document which must fully set out your position, containing the factual background of the matter, the basis of your claim, and the action required to resolve the matter.

As part of the Pre-Action Protocols, attempts at engaging with a form of non-court dispute resolution should be made. For example, you should invite your ex-partner to engage in mediation at the very least. If they do not engage, you can make this point in your Letter before Action.

In terms of setting out the action required to resolve the matter, you should clearly set out the steps you are asking your ex-partner to take. This is essentially the offer you are making in respect of the property and how you want the proceeds to be divided.

Issuing TOLATA proceedings

If an agreement cannot be reached in correspondence, then you may have to issue a court application under TOLATA.

The court’s role is not to redistribute property on the basis of fairness, as it might do in divorce proceedings. However, the intention of the court is to establish the parties’ existing legal and beneficial interests. In doing so, the court will consider the property’s legal title alongside the evidence of the parties’ intentions and conduct. As set out above, this can include evidence of mortgage repayments, renovation costs, discussions about ownership or any written agreements over the course of the relationship.

These types of disputes are heavily reliant on the facts of the case. The outcome will often depend on the quality of the documentary evidence and the credibility of the parties’ accounts, making early legal advice particularly important in high-value property disputes.

Once your TOLATA application is issued, the court will list the first hearing known as the costs and case management conference. This is primarily an administrative hearing, and the substantial outcome of the case will not be determined at this stage.

After the first hearing, there will likely be a further two hearings. The second is a pre-trial review which is a short hearing where a judge checks that all directions have been complied with to ensure the case is ready for a trial. The third is a Final Hearing where a Judge will decide the outcome of the case. Both parties will need to give evidence at this Final Hearing, and it might be listed across a couple of days to ensure there is sufficient time to hear all of the evidence before the court.

In terms of the costs consequences, each party will be responsible for their own legal fees in the first instance. Naturally, the further a court case progresses, the higher the costs will be. As these are civil proceedings, the general rule is that ‘the loser pays the winner’s costs.’ Therefore, this is something that you should bear in mind before issuing a court application. You should be content with the idea that you have a strong case before issuing proceedings as you could be liable to pay the costs of the other party if you are not successful. In some cases this could wipe out the benefit of the potential claim and there always needs to be a careful cost / benefit analysis – TOLATA claims should not be rushed.

Protective measures – Cohabitation Agreements and Declarations of Trust

For unmarried couples with significant wealth, taking proactive legal steps before a dispute arises can provide valuable certainty and reduce the risk of costly litigation.

A well-drafted cohabitation agreement allows partners to record how they intend to own property, manage financial responsibilities during the relationship and deal with assets if they separate. Although cohabitation agreements are not subject to the same statutory framework as prenuptial agreements, they can hold some weight in England and Wales provided they are properly drafted and both parties have the benefit of independent legal advice.

Couples purchasing property together should also consider entering into a declaration of trust. This document will record your respective beneficial interests and can help avoid later disputes over ownership. For example, if one partner has contributed more to the deposit of the property, this can be recorded in the declaration of trust. Thereafter, the declaration of trust can record your intention to own the property equally or in line with distinctive shares referable to the deposit contribution or mortgage payments.

Maintaining clear financial records, retaining evidence of significant contributions and seeking independent legal advice before acquiring high-value assets can all help minimise uncertainty and place both parties in a stronger position should the relationship come to an end.

High-value property disputed: Unique challenges

Property disputes involving high-net worth unmarried couples often present challenges that extend well beyond establishing who paid for a particular asset. Significant wealth is frequently held through complex structures, including family investment companies or trusts, making it more difficult to identify the true legal and beneficial ownership of the assets.

Given the substantial financial stakes involved, many high-net-worth individuals may prefer to resolve disputes confidentially and outside of court rather than pursuing in lengthy and costly litigation. Judgments in TOLATA proceedings can and will be reported without anonymity which is a big consideration for those with a public profile.

Other forms of Alternative Dispute Resolution

As set out above, as part of the Pre-Action Protocol, engagement in Alternative Dispute Resolution should be attempted. The court has the power to stay the proceedings to return the matter to mediation, or other forms of ADR, if they do not believe sufficient attempts have been made to engage in the same.

Early negotiation between the parties, often through solicitors, may enable an agreement to be reached without the time, expense and uncertainty of litigation. Mediation is another popular option, as discussed above, although the outcome of the same is not binding upon the parties. An alternative option to court is arbitration where a specialist is appointed to provide a binding determination. An arbitration can be conducted in private and outside of the court room.

Conclusion

If you are unmarried and have recently separated, family lawyers can help to ensure that you are protected and can help you to find a way to ensure you receive the appropriate provision from property that you previously owned with your ex-partner.

Frequently Asked Questions (FAQs)

Is there such thing as a ‘common law marriage’?

No, despite the fact you have been living together for years as a couple, you do not receive the same rights as spouses do. However, the Ministry of Justice have recently announced that they are reviewing the law in regard to cohabiting couples so this is something to keep a watchful eye on!

Should I enter into a declaration of trust?

If you are buying a property with your partner, and you are making unequal contributions to the same, you should consider entering a declaration of trust as it is a good way to keep a record of your intentions as to ownership from the outset. You should bear in mind that once you get married, a declaration of trust that you entered prior to marriage can be ignored upon divorce, particularly if it would leave one party in a position where they cannot meet their needs.

How long can TOLATA proceedings take?

This largely depends on the court’s backlog but it can take around 18 months, if not longer, for the full TOLATA proceedings to conclude.

My experience

My name is Alice Carter and I am a Trainee Solicitor at Edwards Family Law. I have worked at the firm for over 3 years, and I have assisted the team in various matters which involves these types of property disputes and TOLATA proceedings. Please do not hesitate to get in touch should you have any questions arising from this article.

When it comes to getting married, inherited wealth can create unique legal and emotional considerations for relationships. Nuptial agreements are becoming increasingly popular amongst wealthy couples, business owners and high-net-worth individuals, and often it is a consideration not just for the couple, but for the wider family unit. Nuptial agreements are a strong option to protect inherited wealth. This article will cover what counts as inherited wealth, how it is treated upon divorce, how pre-nuptial and post-nuptial agreements can protect this wealth and the advantages of nuptial agreements.

1. Understanding Inherited Wealth

Inherited wealth often refers to assets being passed from one generation to another. This can include money, property, investments such as shares, family businesses or trust interests. This can sometimes cause emotional and complex issues within a marriage. This can be inheritance received during one party’s lifetime or upon the death of a family member.

Inherited assets are generally considered non-matrimonial during the marriage i.e. will not be included in the marital pot for potential division on divorce. However, the court can invade these assets if they are required to meet the needs of one party. Further, if inherited assets are mixed with marital assets over time, then they can also be considered as having been “matrimonialised”.

It is for these reasons, that families might want to plan carefully and use a pre or post-nuptial agreement to protect their assets and try to avoid protracted disputes during a divorce.

2. What is a pre-nuptial agreement

A pre-nuptial agreement (“prenup”) is a document which a couple enters into before they get married or enter into a civil partnership. The prenup sets out how the financial assets and matters will be divided and handled in the event of a divorce. This is usually structured by setting out each party’s “separate property” and determining what the couple agree will happen financially in the event of divorce.

Inherited wealth is often defined as separate property and the pre-nuptial agreement can work to ringfence these assets. Prenups can also help to reduce potential disputes at the time of the breakdown of the marriage as they can set out a clear structure on how the finances shall be handled.

If you wish to protect inherited assets in a prenup, provision can also be made in the pre- nuptial agreement to protect any future income which is generated by that asset so income remains “separate property.” This is something which we have agreed in previous pre-nuptial agreements that we have done.

In England and Wales, the court retains jurisdiction over financial arrangements on divorce and does not have to be strictly bound by prenuptial agreements. That said, the court will likely uphold the nuptial agreement and give it significant weight, if it was entered into freely, fairly and with full financial disclosure between both parties and each party having independent legal advice. Ideally, the pre-nuptial agreement would be signed at least 28 days prior to the wedding. The pre-nuptial agreement must also be fair at the time of divorce. If the prenuptial agreement does not meet the needs of a party, or the children, at the time of divorce, then there is a risk it might not be upheld. Certain factors must be taken into consideration when drafting a nuptial agreement. These factors are discussed further below.

There are many advantages to a prenup including having more clarity and certainty in the event of a divorce. Additionally, it is a way to protect inherited wealth, family businesses or other significant assets which have been passed down through generations.

3. What is a Post-Nuptial Agreement?

A post-nuptial agreement is entered into after the marriage has already taken place. A postnuptial agreement is sometimes entered into as a follow up document to a prenuptial agreement, but also as a standalone document within the marriage, for example if circumstances change. If entered into as a follow up to a prenuptial agreement, it can reflect the exact same terms as the pre-nuptial agreement. If done in this way, it confirms that you are happy with the terms of the prenup once you’ve had the opportunity to reflect further on its implications. As such, entering into a post-nuptial agreement will give the pre-nuptial agreement more weight and the court is more likely to uphold it. This is often done if the prenuptial agreement was signed a short time before the wedding, for example if negotiations took longer than expected.

Conversely, during the marriage, there may be a significant change in the financial circumstances of one party or they may inherit a substantial asset from a family member which they want to protect in the event of a divorce. If this happens, a post-nuptial agreement is a way to protect those inherited assets. Similarly, one party may purchase a high-value asset and wish to protect it in the event of divorce in order to preserve that asset for themselves or for a child of their own. We have drafted post-nuptial agreements before where this was the main intention of the agreement.

4. How are Inherited Assets typically treated upon divorce?

On divorce, courts generally treat inherited assets as non-matrimonial property belonging solely to the individual who received the inheritance, meaning those assets are often excluded from division during a divorce. However, this protection is not always automatic or permanent. If inherited funds are mixed with marital assets — such as being used to purchase joint property, or contributed toward shared expenses — courts may determine that the inheritance has become marital property through a process known as commingling. Running these sorts of arguments can be very dependent on the specific facts which can make them difficult to resolve without a lot of evidence.

In light of these complexities, maintaining clear financial records and establishing formal agreements, such as pre-nuptial or post-nuptial contracts, can play an important role in preserving the separate status of inherited wealth.

Provision can be made in pre or post-nuptial agreements that even if funds are co-mingled, the inherited wealth should still be considered separate property. As such, these assets should still benefit from their separate status. This is something which can be drafted into the nuptial agreement and specifically tailored to meet your intentions.

5. Essential Elements of an Effective Nuptial Agreement

For a pre-nuptial or post-nuptial agreement to stand the best chance of being upheld by the court upon divorce, there are several key elements which must be considered when preparing the nuptial agreement.

These factors were set out in the case of Radmacher v Granatino 2010 UKSC 42 and laid the groundwork for future family courts to consider when deciding if a nuptial agreement should be upheld. These factors are set out as follows:

i. Sufficient disclosure has been exchanged;
ii. Both parties have received independent legal advice;
iii. There has been no undue pressure on either party to enter into the nuptial agreement; and
iv. The agreement is fair in the prevailing circumstances

Financial disclosure is essential as it is a requirement for both parties to clearly understand each other’s assets, liabilities, income and expected inheritances before signing the agreement. The parties must fully understand the implications of the nuptial agreement and the rights that they are giving up by entering into the same.

By the same token, independent legal advice is equally important to ensure that each person fully understands the terms of the nuptial agreement and cannot later claim that they were pressured or misled. Although a party might be under pressure to sign an agreement because of the impending wedding date, the courts have been reluctant to consider this as undue pressure and will not set aside an agreement on this basis alone. This is why timing is important too. As set out above, ideally the agreement needs to be signed no later than 28 days before the wedding. This is to ensure that situations do not occur where one party is suddenly presented with a pre-nuptial agreement on the morning of their wedding and are forced or pressured into signing it at the last minute.

Courts are also more likely to enforce nuptial agreements that are fair and meets needs at the time of divorce, even if the provision is much less than that which would be ordered without a pre-nuptial agreement. In light of this, it is important for the parties to carefully consider the terms of the nuptial agreement when they are drafting it because if it appears hugely unfair to one party, it may not be upheld.

6. Common mistakes to avoid

Considering a nuptial agreement can be emotionally challenging and time-consuming. One of the biggest mistakes couples make when creating a pre-nuptial or post-nuptial agreement is leaving discussions until the last minute. This can lead to claims of undue pressure or unfairness later on in the event of a divorce. To avoid this, ensure you have those initial discussions with your partner early on. Additionally, it is helpful when couples have discussed the terms of the agreement directly between themselves as this can sometimes help to reduce the time spent in negotiations between solicitors.

You might be tempted to prepare the initial agreement yourself but this can cause issues with drafting. Avoid using generic online templates as these ‘self-made’ nuptial agreements often fail to account for individual circumstances or cases with complex assets. It is much better to have a nuptial agreement drafted by legal professionals so that the agreement can be tailored to your individual needs.

Finally, during the disclosure process, attempting to hide, undervalue, or omit assets can seriously undermine the credibility and enforceability of the nuptial agreement. Full transparency throughout the process is essential and will better help to achieve your aims.

7. Emotional and Relationship Considerations

Discussions about pre-nuptial and post-nuptial agreements can often feel uncomfortable, particularly when inherited assets are involved. Approaching the conversation openly and with sensitivity can help reduce tension and misunderstanding. Rather than viewing these agreements as a sign of mistrust or an expectation of divorce, many couples now see them as a practical form of financial planning that promotes clarity and transparency within the relationship.

If you are worried that the agreement will read too much as though divorce is expected or inevitable, it is crucial to communicate your intentions to your partner. The wording of the nuptial agreement can be tailored depending on your intentions and desired outcomes, for example protecting inherited assets.

Honest conversations about money, inheritance and long-term expectations can strengthen communication and having a nuptial agreement recording this can help both parties feel more secure about the future.

8. When to seek Professional Advice

Family lawyers can help ensure that the nuptial agreement complies with current laws and is drafted in a way that is fair, clear and more likely to be upheld by the courts upon divorce or if challenged.

If you are due to get married and want to protect inherited assets now or in the future or if you are already married and want to ringfence those assets in the event of a divorce, obtaining tailored legal advice now will not only strengthen your understanding of what can be done but will also provide you with greater confidence and clarity for both parties moving forward.

9. FAQs

i. Can inherited wealth be protected without a pre-nup / post-nup?

Generally, inheritance is deemed non-matrimonial property. However, the court can depart from this if the inheritance is needed to meet one party’s needs, or the needs of any children. More protection will be afforded if a pre- nuptial or post-nuptial is in place which classes the inherited assets as separate property.

ii. What happens if inherited money is mixed with marital funds?

If inherited money is mixed with marital funds, this could lead to complex arguments on divorce that the inheritance has been ‘matrimonialised’, meaning that it should be included in the assets that will be divided between the parties as part of the overall financial settlement.

iii. Can a nuptial agreement protect future inheritances?

Yes, a nuptial agreement can protect future inheritances as these types of assets can be included in each party’s ‘separate property’ schedules. These schedules will set out an itemised list of assets that each party wishes to ringfence and confirm that the parties agree those assets are not up for division in the event of a divorce. It doesn’t matter if future inheritance cannot be precisely particularised at the time of drafting the pre-nup or post-nup but an approximate value can be given.

iv. Should I get a pre-nup if I have inherited assets?

If you are not yet married, then yes! If you are already married, you should consider proposing a post-nuptial agreement.

10. My experience

My name is Alice Carter and I am a Trainee Solicitor at Edwards Family Law. I have worked at the firm for over 3 years, and I have assisted the team in drafting many pre-nuptial and post-nuptial agreements where one of the main aims was to protect inherited wealth. Please do not hesitate to get in touch should you have any questions arising from this article.