Chapter Fourteen

MARRIAGE AND AFTER

'Is it worth our getting married?' the girl asked, hope shining in her eyes. 'Or are we better off living together?' She meant from a tax point of view: a simple question, a far from simple answer. She and her boyfriend, both teachers in their late twenties, had lived together for five years and seemed a happy couple.

They were not regular clients. They came to see me a few years ago just to settle this one question. I talked on for half an hour. 'As far as this tax is concerned, you are better off married. The rules of that one favour single people. As for the other tax...' I tried to keep it simple. I stuck strictly to their circumstances and plans for the future. They stood up to leave more muddled than they had come in.

In the end I could only advise they took the broader view. There is more to life than avoiding tax. Would their future children thank them for saving a few quid at the price of labelling them bastards?

The couple shuffled out, vaguely disappointed. I think they expected a firm yes or no.

If I were to advise them today, I would come down   much more strongly in favour of marriage. The legal rules are far clearer on property and inheritance for both spouses and children. Each new tax law recognizes more and more the independence of married women from their husbands. So marriage can give you the advantages of  status and security of position without some of the humiliating dependency.

On the other hand, the male tax dodger will still find a willing girlfriend a more useful accomplice than a wife. Why? Legally, a girlfriend, even after twenty years' residence, remains an outsider. Laws are framed to catch dubious deals between insiders - like husbands, wives and relatives.

The drawback for the tax dodger is that he must trust his girlfriend not to decamp with the proceeds. If she is a wife in all but name, this is not too difficult.

DIVORCE

Melissa celebrated the end of eighteen months of misery as a drudge. She spent every penny of her half of the house proceeds on a mink coat and a holiday in the Caribbean to hunt for a new husband. But she only brought back a tan.

Marnie used her American know-how to divorce three times, ending up after each richer than before. 'She's an asset stripper,' her latest victim growled at me, 'But she marries them first.'*

'Phew,' moaned Phillip, a tall debonair accountant, as we left the lecture room. We had just spent the day listening to a series of lectures on divorce. 'I'm going straight to the florist to buy my wife some flowers. If she divorced me, I'd be skint. I never knew she could claim so much of what I'd worked for.'

'Why should I pay  any maintenance?' whined Roger, a client. 'It's like buying oats for a dead horse.'

'She bleeds me white,' howled another client. I glanced down at his file, poker-faced. He had to pay his wife and two children £1,000 a year between the lot of them. I suspected he was robbing his own night-club, despite all our efforts - we reckoned probably to the tune of £20,000 every year.

'I gave him the house,' said Angela, 'And some money. He's already squandered most of my savings, without consulting me, even. But it was worth it just to get rid of him.'

In my office I signed a letter. It was addressed to the court to justify Felicity's demand for more maintenance to get by on. Her detailed expenses included £15,000 a year for a month's holiday, another large sum for ponies for the children and a groom to look after them. 'Each of her children already gets £30,000 a year,' moaned Nigel, the clerk who had written the letter, a pleasant young man in his mid-twenties. 'That's more than I earn - gross.'

There is no doubt about it: every divorce is different. Judges need the wisdom of Solomon to try to be fair. As everyone knows, the amount of alimony the court awards a wife is determined by the husband's income and capital and by everyone's needs. But few men can maintain two households as well as they could maintain one.

Also, few women, especially older women, even without children, could go out and earn enough to be truly independent. If you don't believe me, just compare average male and female earnings.

When it comes to divorce, many women are torn apart, and not just on the emotional level. They want to take care of themselves, own their own home, pay their own bills. Now they have the chance, they want to show they can be independent. At the same time, they are afraid of missing out on 'their rights', especially if the person who benefits is someone who has just hurt them badly.

Perhaps for the first time, the cold figures drive home to many women just how financially dependent they have been on their husband - as dependent as the cat when he queues at the fridge every morning for his Whiskas.  This deals another and often fatal blow to their self-esteem.

So often the wish to be financially independent goes out of the window, especially where there are children to consider or to justify their change of heart. Most women after a divorce still end up being maintained by their ex-husband, perhaps helped by the state.

A couple may start off wanting a simple, quick, amicable settlement. Once both lawyers have explained what they should be entitled to and the cheese-paring of the other party (as advised by the other lawyer), attitudes harden. Things rarely  work out so simply.

Twenty years ago, there were basic rules. The judge aimed to allocate a wife half the family income and one-third of the family capital. Nowadays, instead of guidelines, there are 'factors to consider'. They include the present and future needs, resources and earning capacity of both husband and wife, their age, the length of their marriage and the contributions of each to the family finances. First consideration must be given to the welfare of the children. So, in fact, for the normal family, little has changed.

The same problems remain. However generous maintenance may be in theory,  solicitors rarely find out all a husband's income or assets. I have heard both clients and colleagues boast to me of the secret reserves they kept out of the clutches of  'that greedy bitch'.

Take income. A husband will produce his pay-slips as an employee. Fine. What about the value of his perks - like the company car, the expense account, the pension contributions made by his employer for a pension that his divorced wife will no longer share in, private medical care for all the family?  What about his National Insurance contributions? They will count towards a pension for his ex-wife only until the date of divorce. From then on, she must make her own contributions.

If the husband is self-employed or the director of his own limited company, searching out his income poses even more problems. Perhaps he has hidden his full earnings from the Inland Revenue for twenty years. If so, he will have no difficulty hiding them from a court, not one member of which knows one set of accounts from another.

Take Bert.  He carved gravestones but preferred to style himself as a self-employed monumental mason. 'Monumental liar' would have done as well. Bert was as tricky as a bag of monkeys. When his wife sued for divorce, the court demanded to see his latest accounts to decide on the alimony.

It was not until after he had drawn them up that the penny dropped for Bert. He realized that the more profit they showed, the more alimony he would have to fork out. So Bert visited another accountant, gave him part of the original papers and received a second set of accounts, for the same year, showing far less profit.

This was crafty, except that Bert overdid it. The accounts showed so little profit that the court decided he would have to sell his house to provide money for Mrs Bert to live on. Bert was outraged. He called on yet another accountant with yet another selection of papers and obtained another set of accounts to wave under the judge's nose.

Believe it or not, Bert finally produced in court six sets of different accounts for the same year. When he had shown all six to the tax inspector, there was uproar. I sat in the tax court and watched goggle-eyed as Bert threatened the silver-haired presiding tax commissioner with a punch up the throat. Of course, Bert fooled the divorce court judges. He kept his house and paid far less alimony than he should have.

Hidden income may cause a discarded or departing wife to be torn two ways. Perhaps she benefited for years from, and turned a blind eye to, income she suspected was illicit. If she wants to continue to get her share rather than watch it being lavished on his new wife, she has to shop her husband. Not only must she prove him a cheat in the divorce court, but the Inland Revenue may produce that court's evidence to investigate his affairs in earlier years. If they suspect fraud, they can dig  back for decades.

If a wife finds it difficult to unearth her husband's full income, his capital may prove even worse. Her husband may have spent his hidden income from earlier years accumulating assets all round the world - for instance, a numbered Swiss bank account, a yacht anchored in a Majorcan marina, a villa in the south of France, or even assets held in a false name or in his mistress's name.

In a situation like this, a wife will find it impossible to prove what really belongs to her husband. I had one client with six adult children. They provided the perfect smokescreen for Dad. Although he ran several companies, his name never appeared on any document. On paper he did not own a bean.

There may be other assets her husband possesses which the court never hears about. Why? Because it does not occur to anyone - at least not to his wife, and he keeps quiet - that they could be valuable. Does his old car have a cherished number-plate? Does he hold rugby debentures for a seat at the Millenium Stadium in Cardiff? A stamp collection? An asset is basically anything you can resell. What she nearly sent to the jumble sale and he created such a fuss about may be worth tens of thousands.

Of course, in court, the husband produces the evidence of his income and capital. It is up to the wife, relying perhaps on memory, to say if the evidence is incomplete. That assumes she knew everything in the first place.

You may decide, come hell or high water, to insist on your share of everything, and let your husband take the consequences. If so, don't make the mistake of many women bent on revenge. An anonymous letter to the Inspector of Taxes gets you nowhere.

Your solicitor, the court or the Inland Revenue (or Customs and Excise or the DWP if he has been fiddling either, and you don't care if he ends up in prison) need facts. This means documentary evidence, even if only photocopies to start with, to show precise dates and amounts. Otherwise your victim can pass off your letter as spite. Every male in the place will agree and sympathize with him, even the most hardened tax inspector.

Take Wanda, a willowy, elegant, aloof sort of woman, married to a jeweller.  For years she lived in luxury and never questioned how he ran his business. When she saw herself replaced by a younger model, her conscience tingled.

She told the court at length that he fiddled his accounts. Her passion on the subject startled even her solicitor. Much of the jewellery he bought and sold never went through the books. He spent the hidden profits on the horses or flying off with her on exotic holidays. He kept a huge collection of gold sovereigns hidden.

No doubt, this was all true, but Wanda could not prove a word of it. Even his passport was not stamped when they went to Las Vegas on a gambling spree. I had the job of defending her husband when the Inspector of Taxes received a copy of the court statements. It was easy.

Lucy, by contrast, was married to a doctor, a general practitioner. Faced with divorce and a beggarly settlement, she reacted with her usual energy. Lucy produced a sheaf of papers to show how her husband had hidden income of £5,000 a year. This was a large sum in the early 70s - much more than he paid his receptionist, gross.  Income from private patients, private prescriptions, kickbacks from drug companies, certificates of death, crematorium fees: it was all there. Her husband did not have a leg to stand on.

He had run his practice for ten years. The authorities immediately assumed he had fiddled a similar amount each year. They charged him tax, then interest on the tax, then penalties on the lot. Lucy received maintenance based on the full amount of her husband's earnings.

The difference between Wanda and Lucy was that Lucy could show how.

Many women reading this will have experienced how slow, humiliating and expensive it can prove to get one's promised alimony; then, every few years, to have to drag yourself back to the court to ask for more. This is one reason why the courts are turning more and more to lump-sum settlements. The wife gets one large sum of money and that is final. There is a clean break. She can either sink or swim.

It is at this point that most women desperately need advice. At a time of great stress, they may be having to cope with a reduced standard of living, returning to work or even starting self-employment - never mind deciding how to spend their lump sum.

We have looked at employment income in Chapters 3 and 4, then at self-employment in Chapters 5 and 6. As for investment, everything I said in Chapters 12 and 13 applies here. You have to know your living expenses and likely future means. Then you must decide whether you need to invest what is left for income, capital growth or a mixture of both.

Take Fenella. When she divorced Hector, the judge ordered a once-and-for-all payment for Fenella of £150,000 and regular payments for the children to be reviewed every two years. She was 50, an up-market lady who had never worked. The sum was generous then, it represented perhaps fifteen years of my gross earnings. It had to last Fenella (plus some state retirement pension at 60) for the rest of her life.

Her investment broker found out in detail what she needed to live on and then set aside £50,000 to buy her a modest home. Some of the remainder he deposited with a solicitor to lend out as second mortgages. This earned Fenella a safe and high rate of interest. Some he put into unit trusts aimed to produce income, some into trusts aiming for capital growth.

He chose well, and Fenella's investments prospered. She was sitting pretty. She received ample for her day-to-day needs, did not have to work and knew that her capital was either growing or safely invested. Of course, the broker reviewed the position every year.

Unfortunately, her very success went to Fenella's head. She began to ask herself, 'Why must I make do with a small house? Hector and I had a mansion.'

Without telling her advisers, she sold her house and bought a more expensive one, selling some of her best investments to make up the price. Selling, buying and moving proved expensive. So did redecorating.

The money tied up in the house was 'dead money' as far as Fenella was concerned. Apart from the joy of living there, it could not earn a penny. The only way to get at it would have been to sell her house, which was the last thing she wanted. The house needed more maintenance and more heating, and in those days she had to pay more rates. She lived alone apart from during the school holidays. Her three children attended boarding schools, paid for by Hector. Having sold some of her best investments, Fenella discovered that less income was coming in. To fill the gap, she made her second mistake.

Without telling anyone, Fenella decided to go into business. She borrowed from the bank at exorbitant rates because she had never tried to borrow before. She tried a venture in which she had no experience and which was not viable.

Putting together her talent for flower arranging and her wide social contacts, she contracted to arrange the flowers for society weddings. Before long, despite hard word, the venture folded. The bank made her sell her house and the rest of her investments to meet her borrowings.

Poor Fenella, at 55 none of her lump-sum settlement remained.

Moral (if there is one):

1  No matter how much income and capital you may obtain, if you don't know how to invest it,   or ignore the advice you have paid for, you will soon lose it.

2  Professional people spend a lot of time on, and earn much of their money from, other people's divorces.

Another common decision of the courts is to leave the wife in the family home until the children grow up. The husband meanwhile continues to pay the mortgage. As soon as the youngest child starts to earn, the house must be sold. Former husband and wife split the proceeds. Again, this is a point at which most women badly need professional advice.

In this chapter we have looked at marriage and divorce.  A widow, or a woman legally separated, can find herself in the same financial tangle. Your best protection is to keep abreast of the world around you. Even if your partner controls all the major outgoings, you should at least know broadly what he must spend, when and where to keep your household afloat. If he refuses to share this information, point out that he is leaving the family terribly vulnerable if anything - a short-term illness is enough - happens to him. Besides, even if you don't earn a penny, you should expect a share in financial decision-making.

*Asset strippers are people who buy up limited companies, not to run them but to close the factory, put everyone out of work, sell off everything the company possesses and dish out the proceeds to the shareholders - mostly themselves.

Next Chapter