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Whilst Christmas may feel like a distant memory, it can be a stressful time for many people and it is sadly true that more couples find themselves contemplating divorce or separation in the New Year. We discuss in this article five areas of law and tax that you may wish to consider on separation.
The tax and legal aspects for a divorce or dissolution of a civil partnership are essentially the same. Unmarried couples will have different issues and much less legal protection/intervention and this article is not able to cover their issues.
Married couples are allowed to transfer assets between them without gains or losses and this relief is still available up until the end of the tax year in which they have separated. After that, any assets transferred between the 6 April and the divorce itself are deemed to occur at market value.You may need advice on potential tax costs and to identify if various reliefs such as Private Residence Relief for your home or Entrepreneurs Relief or Gift Relief for business assets will apply.
One option is a collaborative divorce. Here each party appoints a specially trained collaborative lawyer to advise them, and everyone sits down together a four way meetings to work things out face to face at their own pace. The aim is to work constructively so that relationships do not become toxic in the longer term.
Trusts can be helpful in these situations but using a trust is not an absolute cast-iron guarantee that assets will be completely protected in the event of divorce. The courts powers vary with the nature of the trust and can be very wide-ranging.It is certainly an area to take legal advice and the trustees may find themselves needing to get involved in the proceedings. A trust set up by parents could well be a financial resource for the child and will need to be disclosed and taken into consideration in any divorce proceedings.
Helen Thornley, Tax Consultant
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