Must my debt-free son take on wife-to-be’s hidden borrowing?
My son, who is debt-free, plans to marry for the first time. But it has come to light his intended has not been entirely honest, revealing debts of over £40,000. If they wed, do those financial obligations legally become my son’s? JM, VIA EMAIL Sadly your son’s situation is far from unique. British adults are hiding £70bn in debt from their partners, according to a recent survey, which suggested 16pc of relationships harbour secret borrowings, averaging £8,300 each.
Brits have relied heavily on cheap debt in the decade since the 2008 financial crisis, as wages stagnated. Household borrowing is now at levels not seen since the Eighties, official data has found.
Tellingly, the research suggests almost half a million people would have split from their partner if they had been made aware of their financial skeletons.
Lara Mardell, senior associate at law firm Bircham Dyson Bell, said legally the risk is limited. “In law a person’s debts are their own. Your son does not take on his wife’s by getting married.”
But Ms Mardell warned your son to probe the type of debt. A hefty student loan being paid off gradually is no great concern, or £40,000 owed with a good income or significant assets.
“Unmanageable credit card debt, however, risks her credit rating, and the likelihood of a joint mortgage,” Ms Mardell said. “If they get a joint mortgage and she can’t pay, your son is on the hook for it all. He should consider a mortgage on his own, at a level he can afford on just his income.”
In that case Ms Mardell said your son is well advised to keep his money separate. If a joint account is needed, use it just for those expenses and deposit only agreed funds each month. Your son keeps control of his cash, and the potential for arguments falls.
Ensuring your son’s credit rating is protected is another consideration. Ms Mardell said: “If his wife fails to pay utility bills or other joint liabilities, this could hit his rating. Suggest he keeps bills in his own name so he can ensure they are paid.”
Divorce could bring all this to a head. Ms Mardell said the courts have a lot of discretion to share marital assets and decide who must shoulder the burden of any debt. Courts’ primary concern is to ensure children’s welfare.
“Often this means the financially weaker party, normally the mother, the children’s primary carer, receives a majority of the assets to meet the children’s needs and pay off her otherwise unaffordable debts,” Ms Mardell said.
Finally there is the general question of trust. Ms Mardell advised that, if your son feels his wife has kept important information from him, it would be a very good idea to address this now to help establish healthier “ground rules” for this would-be happy couple. between 1996 and 2016. They make up 3.3 million of Britain’s 19 million families.
Soaring property and rental prices in that time, especially in London and the South East, make it increasingly cost-effective for couples to move in together.
Addressing who owns what in this boom in less traditional living is an awkward grey area.
Cathy Beaumont, mortgage adviser at London Money, said where only one party owns the home you must consider the “what ifs”.
She said: “Your new partner may contribute to the mortgage or even pay it, and live there for years without being named on the deeds. If the relationship sours they usually have no right to a share, but it can get messy.”
Despite the law being generally on your daughter’s side, Ms Beaumont said the non-owning partner may obtain the right to live in the home, prevent her living there or secure part of the proceeds when it’s sold, if they can show they’ve contributed. Moving someone in also means telling your lender. Ms Beaumont said: “Any occupier over 17 years old not on the mortgage will be asked to sign an occupier’s waiver consent form. If the borrower defaults, this ensures the lender’s interest is the priority, so those not named on the mortgage can’t continue living in the property.”
Ms Beaumont is firm: your daughter should seek legal advice on ownership from the outset.
“This may be unromantic but she as the owner needs to be protected,” Ms Beaumont said. “Equally, her partner should be sure where they stand. A Declaration of Trust can resolve many of these issues.”
Helen Marsh, partner at law firm Forsters, agreed you should be wary for your daughter.
“No one automatically acquires rights in a property just because they live or have lived in it with their partner,” Ms Marsh said, adding, “But there are exceptions to this and your daughter can avoid these pitfalls.”
Ms Marsh recommends your daughter and her boyfriend draw up a “cohabitation agreement”.
“This should detail if he is paying her rent or contribution towards costs, whether they expect he will acquire a right to occupy the property, or an interest in it, who will be pay the bills, what will happen if she wants him to move out, and whether furniture will be jointly owned, or earmarked as owned by one or other of them.”
A cohabitation agreement need not be complicated, but must be clear, and signed by them both, Ms Marsh said, ideally with the help of a specialist solicitor so your daughter is fully aware of the issues and risks.
“If she is reluctant to do that, make sure as a minimum she has the conversation with her boyfriend and gets something down in writing,” Ms Marsh said.
One pitfall to be aware of in particular: the easiest way for your daughter’s boyfriend to demonstrate he has acquired an ownership right in the property is by contributing to the mortgage, or the cost of building work. To avoid this, any financial contribution from him should be understood by them both to be rent and/or towards bills, and not “towards the mortgage”.
Ms Marsh said: “Otherwise he could become entitled to a proportionate share in the flat.”
Alternatively, Ms Marsh said your daughter could draw up a simple lodger agreement, making the legal relationship between them clear, and dealing with many of the issues above.
“However a landlord/tenantstyle relationship may not be quite what she had in mind when setting up home with her beloved,” Ms Marsh conceded.
If your daughter has a mortgage, she would need to notify her lender and possibly get their consent to a lodger.
Ms Marsh said: “Wisest is for your daughter to see a solicitor on her own; they will not advise her and her boyfriend jointly.” To ensure an agreement is enforceable, the boyfriend should get his own legal advice.
Your daughter and her boyfriend should disclose their respective financial positions as part of the agreement.
Ms Marsh admitted none of this is very romantic. “But doing this now could save them both a huge amount of cost, heartache and legal fees in the future.”
Our expert reporter
answers readers’ questions. This week: love or money? ‘A joint mortgage she can’t pay puts your son on the hook for it all’