A disagreement is easy to arise and if you are open to the opinion of another person, it can end with the observation that you do not agree and that everyone goes her / his way. Without going into the reason, we all know that a disagreement can grow into something bigger, something that can destroy a relationship. Unfortunately, this often happens unintentionally. But it does happen.
In our practice, we sometimes have uncomfortable conversations with our clients about how to deal with situations that lead to financial inconvenience in the least and financial havoc in the worst case. Uncomfortable, because the moment we are talking to each other, everything is still very happy. We explain every time that it is necessary to have this less pleasant part of the conversation. Not everyone can handle a financial quarrel. For example, if one partner has the largest income and the other is therefore dependent on it for his lifestyle. Or if incapacity for work or illness affects the joint income so severely that choices must be made and a partner finds such a choice unbearable.In this article we will focus on two common circumstances that lead to fewer chunks with preparation.
Aunt’s legacy
Aunt Rian, a childless widow, leaves behind an untaxed house and a well-filled jewel box (her “guilty pleasure”) after a long life. If there is no will, her inheritance is divided between her living sister and the children of her previously deceased brothers. Quite some time ago she made a large donation to one cousin. Aunt Rian has always said that all her cousins are equally dear to her. However, the statutory inheritance law does not consider the previous gift and divides the inheritance of a predeceased person over his (often different) number of children. The partner by marriage of a previously deceased child-rich brother complains about the large differences of inheritance between cousins. Before they knew it, two camps arose, which made it considerably quieter on birthdays. The settlement took an unnecessarily long time because the heirs had to settle the inheritance together. Inexperience, different interests and 14 captains on the ship made the process a precarious business.
In a will, aunt’s last wish could have been arranged with dignity. Not only the distribution among the sister (who did not want a large inheritance at all), cousins and settlement of the previous gift. The settlement can also be invested in, for example, two specific heirs who are known to the others that they will manage aunt’s estate well and according to the wishes of the aunt. Or the settlement can be invested with a professional executor. That gives objectivity and experience.
A fifties couple in love buy their first home
Liz and Albert used to sit together in class, were interested in each other but did nothing with it and each went their own way. Years later, the spark still jumps when Liz’s partner has died a few years earlier and Albert’s marriage is finally over due to divorce. Liz and Albert decide to continue together and buy a pre-war home which, including sustainability and giving an update, costs € 800,000. Liz’s son and Albert’s two daughters are now financially independent and no longer live at home. Liz has inherited assets (she contributes half of the purchase price in cash), a job as a doctor’s assistant and a survivor’s pension. Albert has left assets and part of his pension with his former partner but has a good income. The mortgage will be €400,000.
If the couple in love buys the house jointly and takes out the mortgage and does not arrange anything else, Liz’s assets immediately decrease by € 200,000 on that day because Albert also becomes 50% owner of the house and Liz signs as joint and several debtor for the mortgage. If the relationship unexpectedly ends due to the departure or death of one of them, Liz’s son will protest; his (potential) inheritance has been greatly reduced.
Without a will or “residence clause”, it is excluded that Liz inherits something from Albert and vice versa. Usually it still goes well if cohabitants appoint each other as partners in pension agreements (please do not forget those with previous employers). But for the rest, it is often a source of annoyance or grief if you do not arrange anything if you do not opt for either a registered partnership or marriage.
The capital shift on the purchase/mortgage date can easily be solved with a duty-to-carry agreement “draagplichtovereenkomst”. The other mutual expectations with a cohabitation agreement, wills and, to the extent necessary, risk insurance to secure payment capacity.
Please get it sorted
If relationships are disrupted, achieving an expected result is often not possible. It is for this reason that in our practice several elephants pass the room before we talk about solutions. We therefore advise our clients to discuss these solutions with stakeholders, often children. If one knows what the intention is, understanding is within reach.