When you are facing a breakdown of your marriage, as well as the emotional upset, there are important factors you will need to consider.
If you’re considering separating from your partner you will need to consider who owns the family home, the tax implications of the separation, what happens with your joint bank account, what the effect will be on your Will, whether you will need to receive child maintenance payments, and whether your spouse will benefit from your life policy. This article covers some of the key points.
Is the family home in your spouse’s sole name?
If the answer is yes, you should register a Matrimonial Home Rights Notice at the Land Registry as soon as possible. When your home rights notice has been registered, you will be entitled to remain in occupation of the property whilst this is in place (unless there is a court order to the contrary).
Your home rights notice will come to an end as a result of any of the following:
- Pronouncement of the Final Order in the divorce;
- An order of the Court or voluntary release of the notice by you; and
- Upon death of your spouse.
If the family home is in your joint names, how do you hold your interest in the property? Are you tenants in common or joint tenants?
There are two ways you can hold a property with your partner: Tenants in common or beneficial joint tenants. You will have made this decision when you bought the property.
If you are joint tenants, your share would automatically pass to the other upon death. If you are going through a marriage breakdown, you should therefore consider severing the joint tenancy to tenants in common in equal shares so your share will pass to whoever is named in your Will.
It is important to check how you hold the property before severing the tenancy.
Do you have a Will naming your spouse as executor or leaving a gift to them in your Will?
If the answer is yes, the gift and role of executor will still take place until you are no longer married and your Final Order in the divorce is pronounced. You should therefore consider making a Will to remove the reference to your spouse and leave the gift to whoever you now wish to receive it. This is particularly important if you have severed the tenancy to your property.
What are the tax implications of your separation?
As a married couple your main home will (normally) be exempt from Capital Gains Tax, providing you still live in it. If your marriage breaks down and you decide to move out, you should take advice as this exemption only lasts for a short period but there are often methods which can be adopted to deal with this if you are outside that period of time.
If you have additional properties, the latent tax that is in those properties should be taken into account if they need to be sold to assist in reaching a settlement, and in any event, if you are comparing the net equity in one property in comparison to another or cash.
Likewise, if you or your spouse is an employee in a family business and has a shareholding, you should take advice before making any changes to their employment status, or shareholding. Often there are ways that a settlement can be structured so as to minimise the tax that is payable as a result of the transfer of assets. If changes have been made immediately on separation, without taking advice, this can sometimes prevent tax efficient settlements that would otherwise be available.
Do you have a joint bank account?
If the answer is yes, you should check whether there is an overdraft facility on the account as you and your spouse are normally both liable for any overdraft. It is best to remove this facility from your account or regulate the use of the account to prevent an overdraft being incurred after you have separated. Likewise if there is a money in the joint account, it is possible that one of you could take out the entire amount in the joint account without speaking to the other first – you therefore need to be cautious.
Do you have children together? Is the non-resident parent paying child maintenance now that you have separated?
When you have separated and are no longer living under the same roof, the parent who the children are not living with is required to pay child maintenance. However, if the children spend their time overnight equally between you, this is not payable.
The issue of child maintenance is not dealt with by the Court except in certain circumstances. It is referred to the Child Maintenance Service to resolve. If therefore you are unable to agree a level of maintenance with the non-resident parent, you should contact the Child Maintenance Service to seek their assistance in obtaining the maintenance.
Is your spouse due to receive any benefits under your life policy/pension?
You should check your policies to see who you have nominated to receive any benefits as you may wish to make changes to this following your separation.
What’s the difference between a marriage breakdown and an unmarried relationship breakdown? Read our article here.