I am getting married in five months and we plan to live in a house which was bought for my future husband by his parents. They are suggesting we sign a pre-nuptial agreement to ensure their investment remains in their family in case we separate. Is this something I should agree to?
Prenuptial Agreements are a little mercenary and can cause suspicion from the outset which is not always good for one’s relationship! It may be better to simply view it from a basic property ownership point of view as if you were not getting married at all. In those circumstances there are two issues which arise.
If it was a genuine gift to their son then it may be important for Inheritance Tax purposes for this gift to continue in time – particularly if they gifted the property say 5 years ago – as once a period of 7 years has expired since the gift the value of the gift falls outside the Estate of the in-laws in the event of their death. This may, therefore, have substantial tax savings.
The only way that they can ensure that you agree from the outset that you have no intention of claiming any interest in this property is to enter into such a pre-nuptial agreement recording this intention. Your rights as a wife may still afford you certain rights of occupation etc that may benefit you – regardless of any such agreement and you need to seek specialist advice before doing anything at all.
Alternatively, your in-laws could take a charge over the property for the full value of the purchase price, which means they retain an interest in the whole amount that they advanced to enable the property to be bought. However, this will imply that the purchase monies were not a gift from your in-laws.
If they at some time in the future (after you have been married for some considerable time) wish to release that charge for no consideration then at that time it would amount to a gift and the 7 year rule would start to run from that date. Should you separate then the in-laws’ investment is preserved as they still have a charge on the property.
* Emyr Pierce is Managing Director of Emyr Pierce Solicitors in Rhiwbina, Cardiff, Western Mail Conveyancer of the Year, specialising in Domestic and Commercial Property. Contactwww.emyrpierce.co.uk or email law@emyrpierce.co.uk