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“Ownership arrangements in your relationship have a significant impact on your estate planning. It is essential to understand your own personal starting point. Problems often arise from a lack of knowledge or from incorrect assumptions, which I want to clarify in this article. After reading this, you will understand why it is worth planning your estate with the help of a legal counsel.
From a legal perspective, a relationship – and marriage in particular – is also a financial arrangement. When planning your estate with a legal counsel, you are preparing in advance for the moment when your relationship comes to an end. A relationship can end either through separation or through death. In estate planning, the focus is often on the latter, but it is equally important to take previous, already ended relationships into account.”
Assets are not jointly owned simply because you are in a relationship or married
“A very common misconception is that assets are jointly owned in a relationship. But in reality, Finland follows a principle that applies to both cohabiting partners and married couples: each person owns the assets that are registered in their name. I recommend that everyone checks that their assets, such as their home, bank accounts and holiday home, are officially registered in their name. The unfortunate reality is that assets are often acquired somewhat arbitrarily in one partner’s name only.
Of course, partners can also own assets jointly. In this case, you are co-owners. I recommend ensuring that each person’s ownership share, for example one third or 50%, is correctly recorded.
It is also important to understand the differences between marriage and cohabitation from a legal perspective. The law protects a spouse when a marriage comes to an end. A cohabiting partner does not have the same statutory protections. For example, a spouse may be entitled to continue living in the jointly occupied home without it being divided. Most importantly, each spouse has a marital right to the property of the other spouse by law, which we will discuss next.”
A spouse does not automatically inherit
“In my view, the most common misconception is that a spouse automatically inherits the other spouse. This is not the case, although there are, of course, exceptions. When a spouse dies, the surviving spouse’s marital right to property protects their assets. The surviving spouse’s rights are fulfilled through the division of marital property. Understanding this is fundamental to estate planning if you are married.
When a marriage ends, the assets and debts registered in each spouse’s name are listed. They are then combined to determine the total marital property subject to marital rights. This total is divided by two. The result represents the assets to which each spouse is entitled once the marriage ends.
If the surviving spouse owns less, they are entitled to receive assets from the estate. This is known as an adjusting payment, and it must be settled before the estate can be distributed to heirs. The division of marital property and the adjusting payment made to the surviving spouse do not mean that the spouse is inheriting assets from the deceased. From an estate-planning perspective, it is important to note that the adjustment payment is tax-exempt.
I want to emphasise that every relationship is different, and there are countless individual exceptions to what I have described above. What is most important to understand is that the division of marital property is not the same as inheritance, and that the division of marital property is based on the principle where each person owns the assets that are registered in their name. It is therefore evident that personalised estate planning is worthwhile. A legal counsel takes your relationship and ownership of assets into account in your estate planning. Addressing these things creates a solid basis for the solutions that are developed together with the customer as part of the estate-planning process.”
Pay attention to estate planning and the division of marital property
“The adjusting payment makes estate planning possible. Cohabiting couples do not have this option, as no division of marital property is carried out when their relationship ends. Instead, the assets are simply separated. In a separation of property, each partner retains the assets registered in their name.
The calculation involved in the division of marital property for married couples, as described above, is not always straightforward. Only assets subject to marital property rights are included in the calculation. If you have received assets as an inheritance or a gift, the will or deed of gift may include a clause that limits marital property rights. In addition, spouses can determine which assets are subject to marital property rights by entering into a prenuptial agreement.
Estate planning therefore requires careful consideration. A wealth management legal counsel will also take any endowment insurance the spouses have into account, as beneficiary designations can affect the division of marital property. If you or your spouse have been married before, it is worth taking a moment to consider how this will affect your estate planning. Marital rights to property do not lapse easily, and issues relating to the division of assets from a previous marriage may become relevant even years later. A written separation or division agreement provides the certainty you need in such situations. The division of assets should always be carried out in writing, and the documents should be stored for the future.
Make sure you understand your individual circumstances, and book a meeting with one of our wealth management legal counsels. My colleagues and I are here to help.”
Wealth management legal counsel Iiro Suomalainen has years of experience supporting customers in preparing for life situations important in estate planning.