The Challenge of Separation on ‘Divorce Day’
JM Finn Paraplanner, Uday Tuladhar, provides some practical tips to couples who might be considering a separation.
Uday Tuladhar, JM Finn Paraplanner, gives some tips to couples who are in the process of considering a separation.
When it comes to divorce, knowing what your position is as soon as possible is important so both parties can work towards a fair agreement. Although going through a divorce is a stressful time of life, it’s important to be pragmatic and consider the longer term position instead of just focusing on the here and now, in order to ensure you understand what you’re entitled to and what you need going forwards.
When going through a divorce, consideration should be given to a couple’s tax position, including latent capital gains, to ensure there is an equitable split of assets. Currently, spouses and civil partners can transfer assets between one another at ‘no gain no loss’ until the end of the tax year of separation. This is incredibly useful from a tax planning perspective however this timeframe could prove challenging in some circumstances. HMRC, recognising this, have published draft legislation to offer more lenient timeframes, which could take effect on or after 6 April 2023. This will provide that separating spouses /civil partners be given up to three years after the year they cease to live together in which to make no gain or no loss transfers.
It is important to remember that divorce does not automatically revoke an existing Will. Your current Will remains valid, but for inheritance purposes, your ex-partner is treated as if they had died when your marriage or civil partnership was dissolved. This can have a significant impact on your estate because, if your Will does not state what happens in the event of your ex-partners death, the rules of intestacy will apply and these rules will decide who can inherit from your estate. In consequence, your assets may be divided up differently that what you intended. Both parties to a divorce are strongly advised to update their Wills to ensure their estates are distributed in accordance with their wishes.
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