WEDDINGS may be expensive, but the cost of overlooking the financial consequences of marriage cannot be quantified. Call us unromantic, but you will find our hints on premarital financial planning the best type of relationship counselling.
Pre-nups
Pre-nuptial agreements, which set out who gets what if a marriage ends, are now used not only by celebrities and European royalty but by couples with no ambition to appear in Hello! magazine. Toni Pincott, a matrimonial specialist at Grant Thornton, the accountants, says: “Pre-nups are the best way to try to plan for the unexpected.”
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Lisa Fabian Lustigman, a family lawyer at Withers LLP, adds that while pre-nups are not yet legally binding, increasingly judges are enforcing significant parts of agreements. They will demur only if, for example, they think that one partner has signed under duress. Mrs Fabian Lustigman recommends that couples contemplating a pre-nup each take separate advice from a matrimonial lawyer. Full financial disclosure is required.
The professionals note that pre-nups do not only set out the division of the spoils when a couple breaks up, but they may also set out how the marriage will be run, anticipating potential problems and helping to form an enduring relationship.
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Taxation
The premarital tax arrangements of the wealthy indicate that fathers still fear that their daughters will fall victim to fortune-hunting suitors. Accountants say that these fathers insist that their daughters’ assets, such as shares in the family company, be put into trust before marriage. Mike Warburton, tax partner at Grant Thornton, says: “This has tax advantages. But, if there is a divorce, it also helps to ring-fence assets from a wastrel husband.”
Less well-off, or less suspicious parents, are exploiting another set of tax breaks: the wedding gift inheritance tax (IHT) exemptions. Parents, grandparents, friends and other relations can each give up to £5,000, £2,500 and £1,000 respectively. Income tax concessions for married couples are available only where one partner was born before April 1935. But no capital gains tax (CGT) is levied on transfers between husbands and wives of all ages and you can inherit your spouse’s wordly goods without paying IHT.
In many cases, husbands and wives each own a home. If they opt to live in one property after marriage, this becomes their principal private residence, with no CGT to pay on its sale. If the second property is sold within three years, it, too, will be free of CGT.
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Pensions and investments
What better way to show that you are in a relationship for the long term than to take an interest in your betrothed’s retirement income prospects? Savvy couples recognise the value of the pension tax reliefs and they are considering the A-Day reforms that will permit a property to be held in a pension (see pages 10-11).
Pose these questions to your intended: are you a member of your company scheme and is this scheme defined benefit, with salary-related payouts, or defined contribution, where the value is linked to investment performance? If he or she does not have a pension, suggest a self-invested personal pension plan (Sipp).
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If either spouse is a basic-rate taxpayer, or a nontaxpayer, less tax will be payable on savings transferred into his or her name.
Wedding insurance
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If these issues have given you cold feet, you cannot call the whole thing off in the belief that your wedding insurance will pay out. These policies cover dresses, caterers and a lot more, but not the fallout from a change of heart. Policies, on offer from Debenhams, Marks & Spencer, WeddingPlan and others start at about £60.
Charlotte Owen and Paul Simons, who are marrying in August, were forced to rethink their plans when fire broke out at Stoke Rochford Hall in Grantham, Lincolnshire, the venue for their reception.
Charlotte, 24, says: “I cried when I saw the blaze on the news.” But they were able to claim on their Marks & Spencer wedding policy.