We’re splitting up… how do we move forward and plan for the future?

If you’re separating, divorcing or dissolving a civil partnership, the emotional journey can be tough. There are big decisions to make, often under pressure, and other people to consider. During this stressful time, you will be expected to discuss and agree with your ex-partner how to separate your finances, for example, whether you will sell your family home and how your bank accounts and any savings will be split.

A key area that is often overlooked and put off “until the dust settles” is the impact of separation on any existing Wills, and how assets will be allocated to your family by the law, should you die without making a Will. 

We’ve separated, what happens if one of us dies before the divorce or dissolution is finalised?

Your Will as it is written remains valid, meaning that your spouse or civil partner will inherit, if that’s what your Will states. Equally, if you die without a Will, the rules of intestacy will not recognise any plans to divorce or dissolve a civil partnership, and your ex-partner or spouse will be first in line. You should review your Will as soon as you decide to separate, as dying in this period may result in your assets not passing in accordance with your wishes.

What if I die after my divorce or dissolution?

For the purposes of your Will, your ex-partner is treated as though they died on the date of finalisation. Where your former partner was due to inherit all or most of what you have left behind, you will be treated as if you died without a Will and the intestacy rules will be triggered. These rules impose a strict order on who will receive your estate assets.  This may not reflect what you wanted, so it is vital that you review and re-write your Will following a divorce or dissolution.  

Conversely, if in fact you did want to leave something to your former partner, following the divorce or dissolution this gift will fail. So, you should ensure your Will is updated to reflect this wish. 

If you have named your former partner as an executor, this decision too will fail on divorce or dissolution, unless you have specifically provided for an alternative under these circumstances.

I’m remarrying… what’s the impact on my Will?

Unlike divorce or dissolution, getting married or entering into a civil partnership automatically revokes a Will. If you do not put a new Will in place following a marriage or civil partnership or write your Will “in anticipation” of marriage, when you die, you will be treated as though you had died without a Will. This again will trigger the intestacy rules, risking your assets being passed to people you did not intend to benefit. 

What are the Inheritance Tax (IHT) implications of divorce or dissolution?

Spouses and civil partners can transfer assets between each other without coming into the scope of Inheritance Tax. But, once the divorce or dissolution is finalised, the spouse exemption is lost and any transfers made to your ex-partner could become subject to IHT if they are made within 7 years of your death.    

If transfers are made after the finalisation of divorce or dissolution, but under a court order related to the settlement, HMRC will allow the IHT exemption to apply, as long as this is done with no intention to benefit the recipient, beyond what is agreed in the order.  

There are other tax implications of separation, divorce and dissolution, and careful planning should be undertaken to ensure that as much of your estate as possible is retained for your family. 

What is the impact on my Lasting Powers of Attorney (LPAs)?

LPAs are important documents which help protect your financial, property and healthcare, should you lose mental capacity. If you name your ex-spouse or civil partner as attorney in your Lasting Powers of Attorney, divorce or dissolution will terminate the appointment unless you specifically request they continue to act under those circumstances. And beware, your LPA may become invalid if you have named only your former spouse without additional attorneys, or if you named additional attorneys but did not allow them to make joint and several decisions. It is therefore vital that you speak to the solicitor drafting your new Will about the validity of your LPAs.

If you live in Marlow or Oxfordshire, please contact Bethan Chant at bethan.chant@theburnsidepartnership.com.