Monday 30th March, 2020
5 Financial Aspects to Consider Before Separation
If you and your partner are considering separating, it is essential to ensure that your finances are one of the top priorities within your separation process.
Many of our clients at CP Law Associates take advice from us in advance of their separation. They are keen to know the practical steps that they can take to protect themselves and also their assets. Talking with a solicitor helps a person prepare and familiarise themselves with what to expect practically and financially.
Here are five things to consider before committing to separation:
When a separation occurs either party can be 100% liable for the money owed. It is important that when you have discussed divorcing with your partner that you also contact your bank or loan provider informing them of your divorce, in order to protect your credit rating.
If you are concerned about your partner accessing and spending in the account without discussing it with you, you are able to freeze your account, but bear in mind that whilst one of you can ask for the account to be frozen, both of you have to sign for the account to be unfrozen.
Capital Gains Tax
When thinking of going through a divorce it is worthwhile considering the implications of divorce on Capital Gains Tax. It is important to note that we are lawyers and we are not tax advisors, therefore we can't advise on CGT but instead we can alert our clients to when there may be an issue.
When a married couple (or civil partners) are living together, any properties transferred from one to the other pass CGT free. When a couple separate, this relief from CGT is extended but only until the end of the tax year of separation. After that the relief is lost. The CGT relief for spouses is therefore only available for a short time. This is a particular issue if a couple separate near to 5 April, when it can be impractical to expect agreement to be reached in time to avoid the CGT.
The family home
When it comes to the question of 'who will get the family home?' There is no right or wrong, or straight forward answer, there is no such thing as a standard split of assets when it comes to the family home. It comes down to the circumstances of the divorce and not always the legal ownership or the person that has paid most of the mortgage payments.
If an agreement can be made between you and your partner then a separation agreement should be enough to reach a decision on the family home.
However, that is not always the case, if that isn't the case for you and your partner then you are able to apply for the courts to decide for you.
The court can impose financial remedies to split the assets and can base the decision on many things including:
- The age of each spouse
- The length of the marriage
- The value of assets, both before, during and after the marriage – this can also include pensions
- The earning capacity of each spouse and their responsibilities during the marriage (such as child-rearing) and in the future
How long will it take to get divorced?
On average it takes a couple around 6 months to become divorced. If there are any delays it tends to be around:
- The other party taking slightly longer to reach agreements by being deliberately difficult or has misconceived notions about the process or entitlement
- The other party is receiving poor legal advice
- There are complex financial assets that may require the need for a forensic accountant
Own a business?
If you are in a situation where you and your partner have built a business together over the years, it is firstly important to establish what value should be attributed to the business interests and secondly how the value of the asset will be shared between both parties. A valuations expert may be required and will help to give an understanding on certain aspects including whether money can be withdrawn from the business in-order to pay the other party without having to liquidate the business.
If you are considering separating with your partner, or require any advice on the above issues please contact CP Law Associates on:
Guildford office 01483 230322
Or visit www.cplawassociates.co.uk
We offer a free initial consultation.