Financial planning is really about… advising on who should own the home

Often the worst aspects of falling into financial difficulty is the loss of the family home. If a couple get into financial difficulty, this is the thing that causes the most angst and pain. It often destroys marriages.

If this sounds extreme, ask yourself how your spouse would feel if, for whatever reason, you lost the family home as a result of your business or investment activities. How would things go after that? It might not be the end of things but it is unlikely that you would just laugh and shrug it off. It would probably rank after the death of a close relative as the worst thing that could happen to you, and the most stressful.

For some clients in professional occupations the threat of litigation is always present, at least to some extent. Professional indemnity insurance might yield some relief, but there is always a concern as to whether this adequately covers the situation. Recent reports about the state of some insurers have added to the angst. Many are now rightly wondering whether professional indemnity insurance premiums mean much at all.

For these reasons, taking time to consider how the family home is owned and how it is financed is typically time well spent. You do not know when or how it might pay off.

Should a spouse own the family home?

If a client is at some risk of being exposed to some form of law suit (for example, if he or she is in a litigious occupation), then the client should seriously consider having their spouse own 100% of the family home. And probably all other valuable assets for that matter.

You cannot lose what you do not own. If a client gets sued, their husband or wife’s assets are typically beyond the reach of the litigant.

In fact, ignoring professional indemnity insurance, not having any assets may be the surest way to make sure you do not get sued. There is no point in suing a person with no assets. In fact, it would probably be negligence on the part of a plaintiff’s lawyer to encourage legal action against a defendant who could not pay.

The Family Law Act ignores nominal ownership between spouses. So it does not matter whose name the asset is in should the marriage break down for any reason. Within a divorce, unless there was a pre-nuptial agreement otherwise, what’s his is (partly) hers and what’s hers is (partly) his. This means that arranging things so that a less-risk exposed spouse has their name on the title to all the marriage assets will not prejudice a client if the marriage breaks down.

The Dover Group