How are you married? I’m not talking about church...
When I ask people how they are married, they look at me perplexed. My favourite reply is still “in a church!”. When talking about marriage, in this instance, I mean the marriage regime.
In France and many parts of the world, the legal marriage regime, or marriage contract, dictates how the estate of the couple is dealt with in death (and in life), so it becomes important for financial planning.
Marriage regimes are under the control of international law, specifically the Hague Convention. The UK did not sign this particular convention, so the British do not have marriage regimes, hence the perplexed and humorous replies to my questions.
The British do, however, have a “deemed” marriage regime and it is important to know what this is, or people unwittingly create problems for themselves and/or their spouses.
Your marriage regime is not, in fact, dictated by your nationality or even where you got married (those married in Vegas by Elvis can relax), but is based on where your deemed first marital home was.
The generally accepted rule is that this is where you spent your first two years after the marriage (for couples who have moved around a lot this can get complicated).
This means that, for most British people, it is the UK and they are considered, by the French, to be married under the regime of séparation de biens or separate estates.
It is worth noting that marriage regimes can change by themselves, after a certain period of time spent in France, known as mutabilité automatique.
Sometimes having a regime of separate estates is suitable - usually where there are children from a former marriage, as any other regime can get in the way. For the majority, however, this does not work well at all and can cause significant issues for the survivor, such as losing control over their home and assets, which is rarely the desired outcome.
The good news is that you can change your marriage regime and expatriates can do this simply and cheaply. Note, however, that the simple option is a “one time only” deal. If your change is in error, it gets more complicated and a lot more expensive to correct it, so it is worth ensuring that any changes are right.
A common error, for example, is where those with children from former marriages have changed their regime to one of communauté universelle on the advice of friends and neighbours and have then realised that while this might suit their non-professional advisers, it is a nightmare for them.
Another common error is where the notaire has not understood the couple were living in France and changed the regime only partially, potentially leaving the survivor with a complicated mess. What marriage regime you should have is dictated by your family situation: whether there are children from former marriages, what the objectives are for the estate, any businesses owned and by whom (this is for the protection of certain assets from creditors) and what any future plans might be.
A marriage regime change is not for everybody and there are other solutions.
However, even if you are using other solutions, it is absolutely vital that your marriage regime, whether deemed or by contract, does not conflict with these other plans, or it may negate them and cause a mess.
Knowing your position is essential before considering any kind of planning.
There are other reasons for changing your marriage regime. In most cases it makes sense to set up any investments, such as an assurance vie, in joint names (where there are no children from former marriages involved) and so a marriage regime change may be essential before starting such investments.
People are all different when it comes to what they are comfortable with and what their objectives are, so a tailored approach to succession planning is essential.
This column was written by Robert Kent of Kentingtons financial advisers.