Financial Provisions
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Contents |
7.1 Marital Wealth Plan
"I've worked with wealthy clients for years, and I'll tell you this: Forget money. Money is worth only what you do with it. Never make a financial decision without first asking the question: 'What do we want to do - with our lives, with our family - in the big picture?' The rest of your financial plan grows from your answer to that question."
So write Mary Claire Allvine and Christine Larson, quoting a financial advisor, in The Family CFO: The Couple's Business Plan for Love and Money.
They continue: "Most couples get it backwards: they focus on financial assets (what they have) instead of their real goals (what they want to do). Only by thinking about your life goals can you really make your money work for you."
This first section of the Financial Provisions provides couples with the opportunity to set their shared vision of their life goals and how they intend to realise their goals in financial terms. As Allvine and Larson put it: "Dreams are unlimited. Time and money aren't".
Note that this is the seventh numbered section, Section 7, of the Marriage Contract.
| 7.1.1 | [Romeo] and [Juliet], having consulted with a Qualified Financial Advisor, have agreed joint financial goals that reflect their shared values and aspirations. |
| 7.1.2 | [Romeo] and [Juliet], to give effect to their joint financial goals, have created and agreed a Marital Wealth Plan, a copy of which is attached to this Agreement as part of Exhibit Set D. |
7.2 Personal Property
Bringing two lives together in marriage is a lot like merging two companies. Each brings to the union many different things, including different 'personal property'. After the marriage, however, there will be a new type of property, called 'marital property'. This section and the ones that follows it are offered to help couples make the transition, in financial terms, from singledom to coupledom.
Note that the term 'property' is not limited to dwellings, other buildings or land; it includes both assets and debts and every type.
Let's begin by looking more closely at the terms 'personal property' and 'marital property'.
- Personal property, sometimes called separate property, is property that belongs to one spouse only.
- Marital property, also known as community or joint property, is property that belongs to both spouses.
The document named Living Together Agreements, published in the UK by the Advice Services Alliance in partnership with OnePlusOne and funded by the Department for Constitutional Affairs, sets out some guidelines that couples may wish to take as a starting point for agreeing matters relating to personal and marital property.
The principles are as follows:
- If you owned something before you got together, it belongs to you.
- If you bought something with your own money it belongs to you.
- If you inherited something, or it was given to you by someone else, it belongs to you.
- If one of you buys something and gives it to the other it belongs to the person to whom it is given.
- If you buy something out of a joint bank account it belongs to you equally, unless you have agreed to own the account in different shares. If you have, you own the object in those shares.
- If you buy something together but each contribute different amounts to the price, you own it in the shares in which you contributed.
Pre-marital assets and liabilities
The first task for the couple to make a decision about the property each person owned before they entered into their Marriage Contract. The sample clause below makes its clear that any such 'pre-marital' property remains 'personal property'.
In other words, whatever property each owned before the marriage remains their personal property afterwards.
| 7.2.1 | [Romeo] and [Juliet] agree that all property, including all assets and liabilities, belonging to each party prior to the execution of this Agreement shall remain their personal property, and that any debts shall remain their personal liabilities. |
As stated above, the term 'property' can mean liablities (debts) as well as assets. The couple may wish to state clearly that personal debts, just like personal assets, are unaffected by the Marriage Contract.
| 7.2.2 | [Romeo] and [Juliet] agree that they each remain separately and personally liable for any current and future debts incurred in his or her sole name. |
Gifts and inheritances after marriage
In addition to pre-marital property (property each owned before the marriage), the couple may wish to designate another type of property as personal property rather than marital property: gifts and inheritances.
The following sample clause states clearly that gifts given to one spouse, or inheritances bequeathed to one spouse, are the personal property of that spouse only.
| 7.2.3 | [Romeo] and [Juliet] agree that, following the execution of this Agreement, all property acquired by each party by way of gift or inheritance shall remain their personal properties, and shall not be subject to any claim by the other party under any circumstances whatsoever. |
A further sample clause makes it clear that each spouse's ownership of personal property is in no way affected by the Marriage Contract.
| 7.2.4 | [Romeo] and [Juliet] agree that, following the execution of this Agreement, each shall continue to have at all times full control of his or her personal property, and shall have full rights and authority to sell, lease or mortgage or otherwise dispose of such property and receive all income, rent and profits derived from such property without any restriction and without any interference. |
7.3 Marital Property
Having dealt with personal property, the next task for the couple is to reach agreement on marital property. There is a very simple way to define marital property: marital property is everything that is not personal property.
| 7.3.1 | [Romeo] and [Juliet] agree that, other than personal property defined above, all property and other wealth created or acquired following the execution of this Agreement shall, in the absence of a reasonable demonstration of personal ownership, be deemed marital property belonging to both spouses. |
Sharing of marital property
How is marital property to be shared? One possible solution is for the couple to set a threshold financial amount, and to treat items with lesser or greater financial values differently.
| 7.3.2 | [Romeo] and [Juliet] agree that all property and other wealth created or acquired throughout their marriage, where it is valued at €5,000 or less, shall be owned jointly by them in equal shares. |
| 7.3.3 | [Romeo] and [Juliet] agree that all property and other wealth created or acquired throughout their marriage, where it is valued in excess of €5,000, shall be owned jointly by them in accordance with their relative contributions. |
Marital household expenses
Marriage means sharing a common home - and sharing the everyday expenses associated with running a home. Now is the time for the couple to decide who is going to pay for what. If the couple have living together for sometime, they have probably organised their household expenditures in some way. If so, all they need do is express this arrangement in their Marriage Contract.
Probably the simplest arrangement is for the couple to open a joint bank account for the purpose of meeting everyday household expenses. The following sample clauses set out this arrangement.
| 7.3.4 | [Romeo] and [Juliet] agree to set up and maintain a bank account in their joint names (the 'Joint Account') for the purpose of meeting everyday expenses necessary for the upkeep of their marital home. |
Note: each spouse may still keep separate bank accounts for any money that is not shared (personal property).
The couple have a number of options in deciding how the joint account is to be operated.
- One option is for each spouse to contribute equal amounts each month.
- Another option is for each spouse to contribute half of their net (take-home) income each month to the account.
Note that, with a joint bank account, the law by default treats each person as owning half shares of any balance. This may be what the couple wants. Alternatively, if one is putting in more than the other, the couple might agree that any balance, and any interest on that balance, is owned according to the ratio of their contributions.
| 7.3.5 | The 'Joint Account' and any interest credited to it shall belong to [Romeo] and [Juliet] in equal shares. |
Or, alternatively:
| 7.3.5 | The 'Joint Account' and any interest credited to it shall belong to [Romeo] and [Juliet] in proportion to their relative contributions. |
Note: when a couple share a home, and the utilities (such as electricity and water) are in one person's name, it may be possible for the supplier to pursue anyone else who lives at the address and who uses the services, even if that person isn't named on the bill. A similar rule may apply to property taxes.
7.4 Lasting Power of Attorney for Property
What if, because of health or other issues, one spouse is unable to make decisions about his or her finances? A document named Power of Attorney for Property allows each spouse to appoint a person to manage their financial affairs if they are unable to do so for themselves.
Note that the word 'attorney' does not mean that the person appointed must a lawyer. The 'attorney' can be anybody the spouse chooses. The couple may wish to appoint each other as their power of attorney for property.
| 7.4 | [Romeo] and [Juliet] agree, in caring for each other and as an expression of trust, that in the event that either becomes legally incapacitated, the other shall act as their Lasting Power of Attorney for financial matters. |
7.5 Wills and Estates
It may be advisable for each person to make a Will and to incorporate their Wills as part of their Contract.
| 7.5 | [Romeo] and [Juliet] have each made a will, copies of which are attached to this Agreement as part of Exhibit Set D. |
7.6 Voluntary Provision
It is probably impossible to design an agreement on financial matters that would take account of every possible circumstance. Couples may therefore wish include a clause that provides them with a measure of flexibility in responding to unforeseen circumstances. The following sample clause is offered for just this reason.
| 7.6.1 | [Romeo] and [Juliet] agree that nothing in this Agreement shall preclude either party from making voluntary gifts to the other or from making voluntary provision for the other, whether by Will, trust or otherwise. |
For the avoidance of doubt, where a clause such as the above is included, the couple may wish to follow it with a related clause similar to the following.
| 7.6.2 | [Romeo] and [Juliet] agree that any such voluntary provision shall not be construed as varying the terms of this Agreement nor as evidence that there is or was any agreement between the parties otherwise than is specifically contained in this Agreement. |
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