How a Divorce Can Affect Your Estate Planning
How Your Estate is Affected by Divorce
According to data from the Office for National Statistics, 102,007 couples divorced in England and Wales in 2017. Although divorce is now a fairly common occurrence, many people aren’t aware of how it affects their existing estate planning. In this article, we’ll answer some of the most common questions to help you understand what you might need to do.
Does a Divorce Revoke a Will?
If you make a Will while you’re married and then get divorced, this can have a direct impact on the terms of your Will. Although your Will remains valid, your former spouse will no longer be able to benefit from it, unless you have stated otherwise. This is because any gift to your former spouse is treated as if he or she had died on the date your Decree Absolute was issued.
Your ex-partner will also no longer be permitted to act as an Executor or Trustee of your estate. And if they were entitled to a majority of it in your Will, then you may need to appoint a new beneficiary.
However, you can still leave assets to your former partner in your Will. If you have a financial obligation to them, then you should take this into account when conducting your review.
Because divorce can often take months – sometimes years – to finalise, we recommend revising your Will immediately to protect you and your children during this period.
Bear in mind that if you choose to remarry, your Will could be revoked, unless you include a ‘contemplation of marriage’ clause. If you don’t write a new Will, your estate will be divided under the strict rules of intestacy when you pass away.
Will I Lose Any Tax Exemptions?
While married, any gifts you and your partner left to each other would have been exempt from Inheritance Tax (IHT). After a divorce, you lose this exemption and your estate will only have a tax-free limit of £325,000. But, transfers made for the maintenance of the family will remain exempt from tax too. If you get remarried, you will receive the same IHT exemption again.
A family home will be exempt from Capital Gains Tax on transfer, as long as it was you and your partner’s main residence throughout the period of ownership.
Can I Still Leave Our Property in My Will?
If you own a house jointly with your ex-spouse, it will be as Joint Tenants. This means that you both own 100% of it, so if you die first, the house will not form part of your estate. Your spouse will inherit the house automatically, no matter what your Will states.
However, you can own a house as Tenants in Common instead. This means that you both own a set percentage of the house, which will form part of your estate and can be given away in your Will. You can change your ownership to Tenants in Common with a process called Severance of Tenancy. This can be done by a couple jointly, or by one party unilaterally, as long as they notify the other in writing.
How Do I Make Changes to My Power of Attorney?
If your ex-spouse is one of your attorneys, you will need to send the Office of the Public Guardian a written statement called a ‘partial deed of revocation’ to change this. But, if you want to add a new attorney, you will need to end your current Lasting Power of Attorney (LPA) and make a new one. Your LPA may end if your attorney divorces you, so you should contact the Office of the Public Guardian for advice.
How Can I Stop My Ex-Partner Receiving My Pension?
If you have a pension, there will likely be a lump sum payable upon your death. A nomination form is usually completed, which allows you to name the person you want to receive those benefits. If this person is your ex-spouse, you should contact your pension provider to request a new form.
How Will My Parents and Inheritance Be Affected?
We recommend that your parents review their Will if they plan to leave you part of their estate, as this could still pass to your ex-partner if you inherit it before you reach a financial settlement. One way of avoiding this issue is to create a Trust. It holds inheritance until a beneficiary is ready to receive it, as well as protecting it from any claims. This is also an effective way of reducing the IHT bill on the gifted assets.
How We Can Help
A divorce can be a stressful and emotional time, but it’s important to consider the plans you currently have in place. We can assist you in making changes to your existing Will – or if you don’t have one, we can help you create one. If you don’t make a Will, the rules of intestacy will apply, and the government will decide how your estate is divided.
Our experienced consultants can help you make amendments to your Lasting Power of Attorney.
We can also help you or your parents create a Trust. This will shield your inheritance from any claims and ensure that it passes onto the people you choose.
Because we are estate planning specialists, we strongly recommend that you seek advice on your divorce from a suitably qualified and experienced lawyer before you take action.
Protect your assets during and after divorce by getting in touch with one of our friendly advisers today. Simply email us at email@example.com or call us on 01743 37990.