Sharing wealth with spouse is way of securing it

Financial advisers say formerly high net worth individuals are busy searching for ways to save something, writes COLM KEENA

THE DRAMATIC collapse in asset prices has left people who were formerly wealthy now facing ruin, and many are looking at ways to shelter some of their wealth, according to a number of sources.

One way of securing wealth from creditors is to share it with a spouse. Sources say there are a number of cases where assets in sole ownership are being sold and the funds used to settle mortgages on properties that are jointly owned and in negative equity. In this way the wife’s share of a property can be secured.

The slow-moving process involving the National Asset Management Agency (Nama) is providing a backdrop to this. Loans in difficulty are being transferred to the agency. Business plans for the property developers concerned have to be assessed and dismissed before the developer might find a judgment order being sought. This could take three years or more, giving people time to prepare defences from the future rights of creditors.

Meanwhile, there is some surprise among pension professionals at reports that former Anglo banker Seán FitzPatrick’s pension fund is jointly owned with his wife. It is usual for a pension fund to belong to a particular individual even if that person’s spouse has an entitlement to an income from the fund in the event of the owner’s earlier demise.

Mr FitzPatrick resigned as chief executive of Anglo Irish Bank in January 2005. The bank’s 2005 annual report said he retired with a pension entitlement of €533,000 per annum. It did not state how much was transferred to his personal pension fund at the time, though the accounts noted the amount was €2.56 million greater than the actuarially-calculated minimum transfer value of his accrued pension benefit at September 30th, 2004.

The transfer value paid was approved by the pension fund trustee as being in the best interests of the pension fund as it represented a considerable cash saving when compared with the potential cost of purchasing an annuity to honour the fund’s obligations, the accounts stated.

A fund large enough to provide an annual pension of €500,000, with some pension entitlement for a spouse in the event of the death of the fund’s owner, would have to be many tens of millions, and possibly €100 million, according to those with knowledge of the area.

The value of the fund has fallen hugely in the period to date. Mr FitzPatrick’s pension fund is thought to have invested heavily in Irish bank shares.

Reports of the scheme offered by Mr FitzPatrick to his creditors said he owned half a €6.8 million fund, with his wife owning the other half. He offered his half to the creditors as part of a deal that was not accepted.

How such a 50/50 split could be put in place is not clear and could not be clarified last night. However, the whole issue of Mr FitzPatrick’s pension is likely to be reviewed by the official assignee, Chris Lehane, now that Mr Fitzpatrick is a bankrupt. Under the 1988 Bankruptcy Act, Mr Lehane could apply to the court for the receipt of any income or pension payment due to Mr FitzPatrick. The court would rule “having regard to the family responsibilities and personal situation of the bankrupt”.

Earlier this year the businessman Brendan Murtagh failed in a bid to retain a personal pension fund valued at up to €1.2 million. Mr Murtagh has debts of more than €300 million. Mr Murtagh had asked the court that he be allowed keep shares worth €700,000 and his pension fund to allow for future living expenses.

However, Mr Justice Kelly in the High Court felt the amounts involved were too large for what most people would consider “reasonable” living expenses.