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Selling beneficial interest to spouse - house in spouse's sole name

edited 30 November -1 at 1:00AM in Bankruptcy & Living With It
15 replies 1.9K views
lifeoflearninglifeoflearning Forumite
22 posts
edited 30 November -1 at 1:00AM in Bankruptcy & Living With It
Hi all,

Found lots of helpful info on here over the years but can't quite find a definitive answer to my question in my research so thought I'd post up!

10 years ago I defaulted on multiple credit agreements (combination of having too much money as an early-20 year old, being irresponsible with my borrowing, and then losing my job). Anyway, they have all dropped of the credit rating and in a way have fallen into the abyss! 2 of them are over the £5k mark that COULD see the creditor be able to petition the court for bankruptcy. I say COULD as I've heard nothing from one of them for nearly 4 years (no idea if they even still own it!), and the other was sold on. but I believe it to be unenforceable due to them not having the correct paperwork - they will both become statute barred in 2.5 years time. So whilst it doesn't look likely that they will try to bankrupt me, I don't want to take any chances with regards to my wife's house and feel like I need to take some defensive action. N.B. I've used briefing paper CBP5271 as the basis of the following logic, however I may very well have misinterpreted it so please forgive me if that is the case!

Fast-forward to now..........married with 2 kids and no longer an irresponsible fool (lessons learnt by growing up, having no money, as well as not having access to credit for over 6 years!). The house in which I live is in my wife's sole name; she bought it 4 years ago from the council on the RTB scheme (we were together at the time), but as the tenancy was in her sole name, the discount given (which also formed the deposit for the purchase) was in her sole name also. Also, given my poor credit history from the defaults (these debts were accrued way before we met btw), she was the only one on the mortgage, and has been ever since. However, I accept that I MAY have accrued some beneficial interest in the property given that I will have contributed to bills etc. Things get complicated as we used to bank jointly so its hard to prove whose money paid for what, so I just want to think worst case scenario and assume that I do have BI to avoid any grey areas. I am now unemployed and have no source of income; my wife is currently the "bread-winner" as I am now studying, and it will be as such for the next 3 years. So, my thinking is that from this point on, my contribution being £0, I will accrue no further BI, and this will all be easy to document, especially given that we now bank separately. But I am still worried about any BI that I will have accrued in the last 4 years. What I would like to do is have my wife buy my beneficial interest in the property, rendering me with nothing, and I wish to do this now, IN CASE anything happened; I believe that if I were to wait and any of the creditors did attempt to make me bankrupt, this would not be possible at that point as an OR would look at the transaction as evasive; so a transaction way before the potential event seems to be sensible to me; are there any flaws in this logic? Just to be clear, I am not talking about an undervalue transaction; there would be actual money involved at the correct value. Also, I just want to re-iterate that I myself have no intention of filing for bankruptcy, this is in case a creditor were to attempt to bankrupt me, and of course all would be done with no provable foresight of a bankruptcy.

I'm wondering how we go about legally and officially doing this so that it can never be in question at a later date. Also, I am wondering how on earth my BI would be calculated.

Sorry about the long-windedness of this question, any help much appreciated!
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Replies

  • ciderboy2009ciderboy2009 Forumite
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    If I were you I would give up on this idea - mainly because the first thing you would have to do would be to get divorced!
  • edited 25 June 2019 at 11:18AM
    lifeoflearninglifeoflearning Forumite
    22 posts
    edited 25 June 2019 at 11:18AM
    Really?! Why would I have to get divorced?! Is it because you can only gift things to a spouse, and not sell?

    purnells.co.uk/bankruptcy-and-ivas/house/transferring-to-your-spouse

    This talks about selling your share to your spouse, doesn't say you need to divorce first!
  • ciderboy2009ciderboy2009 Forumite
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    It actually depends on the amount of equity in the house.

    However, it is likely to be assessed that, as you are married, then your beneficial interest in the property is 50% - "what's mine is yours" etc.

    You would therefore be giving away a fairly large asset which could be frowned upon were you to be declared bankrupt.
  • lisyloolisyloo Forumite
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    Really?! Why would I have to get divorced?! Is it because you can only gift things to a spouse, and not sell?

    purnells.co.uk/bankruptcy-and-ivas/house/transferring-to-your-spouse

    This talks about selling your share to your spouse, doesn't say you need to divorce first!


    You cannot just get divorced because it suits you financially (I’ve looked into it for tax planning).
    There are specific grounds for divorce e.g. abandonment, adultery etc.

    Of course you could lie but you’d have to live the life of hermit afterwards to avoid a charge of perjury in case anyone posts a photo of you together on social media.

    P.s. I wasn’t seriously looking into it, but sometimes I get curious.
  • lisyloolisyloo Forumite
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    This isn’t a judgment or criticism but have you considered paying off the debts.

    I received erroneous sums in the past (a bonus that wasn’t pro-rated).
    I volunteered the money back, not because I’m an angel but because I didn’t want it hanging over me for 6 years.
  • Minkym00Minkym00 Forumite
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    Unless you have made any provable financial contributions towards the property the OR will not consider you have a beneficial interest in it. There was a question on this forum the other week and the poster was in exactly this position, and they updated me privately that the OR took no further action.
    (If you do however want to calculate a potential beneficial interest then this is where it is calculated https://www.nationwide.co.uk/about/house-price-index/house-price-calculator)
    Your best option is to avoid bankruptcy by getting any individual debts under £5k. But I appreciate that this is effectively poking the sleeping tiger.
    Additionally if you were made bankrupt the OR would be looking to see that any monies received from your wife went towards paying off your debts equally to avoid a preference allegation.
  • lisyloo wrote: »
    You cannot just get divorced because it suits you financially (I’ve looked into it for tax planning).
    There are specific grounds for divorce e.g. abandonment, adultery etc.

    Of course you could lie but you’d have to live the life of hermit afterwards to avoid a charge of perjury in case anyone posts a photo of you together on social media.

    P.s. I wasn’t seriously looking into it, but sometimes I get curious.

    Oh, no! I'm not even considering that! Besides, even if I were, it would never wash with the wife! I was just asking why I would need to divorce to do what I was asking, not that I was entertaining the idea!
  • Minkym00 wrote: »
    Unless you have made any provable financial contributions towards the property the OR will not consider you have a beneficial interest in it. There was a question on this forum the other week and the poster was in exactly this position, and they updated me privately that the OR took no further action.

    This is interesting, thanks for that info. Would you be able to post a link to that thread for me to read through; I couldn't find anything remotely similar to my situation in my research so would be great to read. When it comes to proving contribution towards the property, do you know how this is done? I always thought the responsibility would lie with me to disprove BI as opposed to it being the other way around.

    Yes, don't really want to go poking around with things; after all, it's possible that things will just sit for the next couple of years and then this will all be immaterial anyway

    Thanks.
  • Thanks for posting that.........and so glad things were ok with that person. Would hate to think what would have happened if things had gone the other way with her bankruptcy.

    So finally after YEARS of trying to understand how BI is viewed with regards to bankruptcy, I finally have a definitive answer! Thanks you so much!

    As I understand it, IF any creditor were to attempt to make me bankrupt, I could ask the court to allow me to apply for a DRO instead as a more suitable course of action. Is beneficial interest with respect to a DRO viewed in the same way as in a bankruptcy case (i.e. presumed to follow legal title)? I would image it would be, but I only ask as you never know in this strange world!!!

    Thanks
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