Should I invest in my house, when it's in my wife's name?

Question

I loaned my wife about £50k in order to do work on the property she owns. I did this with a documented loan agreement, and she was not my wife at the time.

Now we are married, I moved in, and sold my property. We want to do further work on our marital home but it remains 100% in her name. We also have a prenuptial agreement in place to protect her interests in the event of divorce.

Her place is worth about £1.5m and my assets are about £400k (not including the amount she owes based on the loan). There is no mortgage.

I'm slightly uneasy about dropping another £50k on a property in which I have no interest.

How should I proceed?

Answer 1

The best answer to this question will depend on you and your wife. What is 'fair' for some may not be 'fair' for others. Some couples split expenses 50:50. Some split proportionately based on income. Some pool everything together. What works best for you will depend on your relative incomes, your financial goals, living standards, and most importantly, your personal beliefs. Here is a great question with various viewpoints: How to organize bank accounts with wife. It doesn't touch heavily on home ownership / pre-nuptial agreements, but might be a good starting point to getting you to think about your options.

Consider providing another loan to your wife for additional investments in the home. It seems you are both comfortable with the realities of the pre-nuptial agreement; one of those realities seems to be that in the event of divorce you would lose access to the house. Loaning money has the benefit of allowing for the improvements to be done immediately, while clearly delineating what you have spent on the home from what she has spent on the home.

However, this may not be 'fair', depending on how you both define the term. Have you discussed how expenses and savings would be split between you? Since there is no mortgage on the house, she has effectively contributed her pre-marital assets towards paying substantially all of your housing costs. It may be 'fair' for you to contribute to housing costs by at least splitting maintenance 50:50, or it may not be. Hopefully you talked about finances before you got married, and if not, now would be the best time to start. I personally would hate to have an 'uneasy' feeling about a relationship because I failed to openly communicate about finances.

Answer 2

Have you talked with her about this?

On the one hand you have a point. Given the prenuptial agreements why should you invest in something that you can never have interest in. However, you also live in the property. You did not go into the arrangements but presumably you should be contributing to the upkeep of the home as otherwise you would live there for free.

Additionally you did not mention it but it sounds like the prenuptial does not cover your assets. In the event of divorce she, presumably, would own half of your 400K. Correct?

The key here is a conversation. What is right for the two of you? While some might be very uncomfortable with the situation, as is, you two seem to be okay with it. Go from there, build on it. Come up with something that is equitable for both parties and your heirs.

Answer 3

If you are concerned about it being inequitable due to the prenuptial agreement, discuss the idea of amending the prenuptial agreement to give you some consideration for your investments in the house. Prenuptial agreements often get amended over the course of a marriage.

How do you proceed? It has to start with discussion. It's not an unreasonable concern given your legal separation of assets, so broach the subject and go from there. Perhaps you'll find there's a good reason for you to invest in the property even without having interest in it, who knows.

Answer 4

The prenup complicates things.

The traditional vow of a marriage is "What's mine is yours, what's yours is mine". With such a traditional marriage it doesn't matter too much which partner's name something is in, in the event of a divorce the assets of the couple would be considered as a whole and then split.

But you have a prenup which is presumably intended to change this traditional arrangement (and may or may not actually be enforceable). I think you are as such right to be wary.

I think your only way forward long term is to amend the prenup and/or the legal status of the house to recognize it as a shared asset that you will both be contributing to and that it's value should be split in some way in the event of a divorce. In exchange you should probably be contributing some or all of the cash pile you have from selling your house to the common pot.

Another loan may seem like a good option in the short term but in the long term the appreciation on a house is likely to be worth more than any interest on the loan (assuming you are using an interest rate comparable to commercial mortgage deals), plus any interest may well end up being taxable.

Answer 5

I'm not going to speculate on the nature of your relationship with your wife, but the fact that you are worried about what would happen in the event of a divorce is a bit concerning. Presumably you married her with the intent of staying together forever, so what's the big deal if you spend 50k upgrading the house you live in, assuming you won't get divorced?

Now, if you really are worried about something happening in the future, you might want to seek legal advice about the content of the prenup. I am guessing if the 400k were your assets before marriage, you have full claim to that amount in the event of a divorce*. If you document the loan, or make some agreement, I would think you would have claim to at least some of the house's appreciation due to the renovations if they were made with your money*.

*obligatgory IANAL

Answer 6

It is my opinion that part of having a successful long-term relationship is being committed to the other person's success and well-being.

This commitment is a form of investment in and of itself. The returns are typically non-monetary, so it's important to understand what money actually is.

Money is a token people exchange for favors.

If I go to a deli and ask for a sandwich. I give them tokens for the favor of having received a sandwich. The people at the deli then exchange those tokens for other favors, and that's the entire economy: people doing favors for other people in exchange for tokens that represent more favors.

Sometimes being invested in your spouse is giving them a back rub when they've had a hard day. The investment pays off when you have a hard day and they give you a back rub.

Sometimes being invested in your spouse is taking them to a masseuse for a professional massage. The investment pays off when they get two tickets to that thing you love.

At the small scale it's easy to mostly ignore minor monetary discrepancies.

At the large scale (which I think £50k is plenty large enough given your listed net worth) it becomes harder to tell if the opportunity cost will be worth making that investment. It pretty much comes down to:

Will the quality-of-life improvements from that investment be better than the quality-of-life improvements you receive from investing that money elsewhere?

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As far as answering your actual question of:

How should I proceed?

There isn't a one-size fits all answer to this. It comes down to decisions you have to make, such as:

• do you think this opportunity is worth the risk?
• do you want to treat your spouse as an economic adversary or economic partner?*
• are there other alternatives that you can explore to make the situation more equitable?

_{* in theory it's easy to say that everyone should be able to trust their spouse, but in practice there are a lot of people who are very bad at handling money. It can be worthwhile in some instances to keep your spouse at an arms length from your finances for their own good, such as if your spouse has a gambling addiction.}

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With all of that said, it sounds like you're living in a £1.5m house rent-free. How much of an opportunity cost is that to your wife? Has she been freely investing in your well-being with no explicit expectation of being repaid? This can be your chance to provide a return on her investment.

If it were me, I'd make the investment in my spouse, and consider it "rent" while enjoying the improvements to my quality of life that come with it.