How to Fill in a Form E Financial Statement on Divorce – pt 2

How to Fill in a Form E Financial Statement on DivorceLast week’s blog Form E Financial Statement on Divorce – pt 1 set out the documents you need to gather together. This week I’m guiding you through the Form E Financial Statement, explaining the tricky bits and pitfalls. However there’s no substitute for taking advice from a family law expert.

You need to answer the questions thoroughly and honestly. Why? See my blog  Financial disclosure on divorce, 10 things you need to know.

1.13 Child support

If you’re not sure about your position see my blog What are your child maintenance options? Here’s a link to the online child maintenance calculator

2.10 Capital Gains Tax

Here’s a link to an overview of Capital Gains Tax. If you have any doubts about your tax liability you should consult your accountant. Also please see our blog Does Splitting up Affect Tax in the UK.

2.11 Details of all your business interests

Providing information about your business doesn’t mean it’s automatically up for grabs in the divorce. See my blog How to Protect Business on Divorce

2.14 Other assets

“You are reminded of your obligation to disclose all your financial assets and interest of ANY nature.” If you wonder why this warning is necessary take a look at my blog Financial Disclosure on Divorce – 10 Things You Need to Know

3. Financial Requirements Part 1 Income needs

Print off the checklist from the Advice Now website, fill it in and attach it to the form.

3. Financial Requirements Part 2 Capital needs

Often for accommodation. Consider your reasonable housing needs and do some market research. Also note your potential mortgage capacity and show your net capital requirement.

4.2 Brief details of the standard of living enjoyed by you and your spouse/civil partner during the marriage/civil partnership

This is only likely to have consequences in very high value divorces where there’s a significant excess of resources. See my blog A Guide to “Needs” on Divorce – Christina Estrada’s Extraordinary Essentials. In this case the Judge described the couple’s standard of living as “stratospheric”. The starting point for the division of capital is equal shares. But division can be unequal:

  • where needs cannot be met, or
  • in high value divorces where there’s been a “stellar” contribution by one party.

Stellar contribution, otherwise known as special contribution, is considered in my blog Special Contribution on Divorce: How to Get a Bigger Share of the Assets.

If you married an established millionaire there’s a chance you won’t get an equal share of their fortune on divorce. However if you give full details of your lavish lifestyle this might justify a share not simply based on your needs.

4.4 Bad behaviour or conduct

This goes way beyond unreasonable behaviour and adultery.  An argument for a bigger share on this basis is unlikely to succeed unless for example it’s a question of:

  • “wanton” or “reckless” expenditure, or
  • your ex destroying your ability to earn an income by injuring you or burning down your business.

4.5 Other circumstances

It’s important to give careful thought to answering this question. It could justify a greater share of the capital or a maintenance order.

5. Order sought

Take advice from a family law expert to find out what you can hope to achieve in a financial settlement.

Statement of Truth

Wondering why the contempt of court warning is necessary? Take a look at my blog Financial Disclosure on Divorce – 10 Things You Need to Know

How to Fill in a Form E Financial Statement on Divorce – pt 2

Contact Family Lawyer Joanne Houston on 01962 217640 for an initial consultation on How to Fill in a Form E Financial Statement on Divorce. In this 20 minute session she will review your situation and how you can achieve your objectives.

JUST FAMILY LAW are specialist divorce and family lawyers. We offer Pay as you go costs. We offer Collaborative law solutions tailored to your family’s needs.

The topics covered in this blog post How to Fill in a Form E Financial Statement on Divorce are complex. They are provided for general guidance only. If any of the circumstances mentioned in this blog apply to you, seek expert legal advice.

image for How to Fill in a Form E Financial Statement on Divorce, Vic, Iceland, by Unsplash on Wikimedia

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How to Change a Will after Death



How to Change a Will after Death

How to Change a Will after Death

This blog is about changing a will after death. It’s not about changing a will before death. And it’s not about trying to make good a glaring omission in a will after someone dies, for example if you discover the will wasn’t signed. This is potentially an “intestacy” (more of which below) unless an earlier will is discovered. But don’t worry, changes can also be made after death where there is an intestacy.

If you’re thinking of making a will make sure you get advice from an expert – this could save your family a lot of heartache and money in the long run.

See my recent blog Do I need a will? Here’s one very good reason to find out how to benefit your family.

Why would anyone want to change a will after death?

Reasons include:

  • Reduce inheritance tax or capital gains tax
  • Benefit someone who was overlooked in the will
  • Skip a generation

What’s an intestacy?

It’s when someone dies without making a will.  The intestacy rules apply to decide who gets what. Here’s a helpful guide Intestacy – who inherits if someone dies without a will

How is a will or intestacy changed after death?

It is changed with a document known as a deed of variation or a deed of family arrangement. There are various important rules if you want it to be effective. 

What is a deed of variation or deed of family arrangement?

A written agreement changing the will (or intestacy) after death. There are certain requirements. The beneficiary or beneficiaries who have inherited must be agreeable to the change and the change must take place within two years of the death to be effective for tax purposes.

But there are other very strict rules too. Here is a link to a helpful HMRC form Instrument of Variation ChecklistYou can use this form to see if you will meet the requirements of the Inheritance Tax Act and the Taxation of Chargeable Gains Act. HMRC recommends you go through the form before the variation is signed.

But if you have the slightest doubt please seek expert legal advice – this can be free, low cost or fixed cost.

I still don’t get it, can you give me an example?

Imagine a situation where there are three generations of a family: grandmother (Edna), daughter (Barbara), and granddaughter (Sophie). When Edna dies she leaves everything to Barbara. Shortly afterwards, Barbara discovers she herself is seriously ill.

Although both Edna and Barbara lived very modestly, added together their estates would be liable to inheritance tax. Barbara wants to leave everything to Sophie but doesn’t want her daughter to pay tax. She comes to us and asks us what she can do.

We advise a deed of variation. This sets out that the gift in Edna’s will to Barbara goes instead to Sophie. This meant that when Sophie inherits her mother’s estate shortly afterwards, there is no inheritance tax to pay. Edna’s estate has skipped a generation to Sophie.

What about joint ownership?

If you inherited as a joint owner but you would much rather someone else benefitted, this can be changed too.

How to Change a Will after Death

Contact expert Wills solicitor, Karen Layland, on 01202 798199 or by email karenlayland@just-family-law.com for an initial free of charge consultation on the question How to Change a Will after DeathIn this 20 minute session she will review your situation and how you can achieve your objectives.

JUST FAMILY LAW are specialist divorce and family lawyers. We offer Pay as you go costs. We offer Collaborative law solutions tailored to your family’s needs.

The topics covered in this blog post How to Change a Will after Death are complex. They are provided for general guidance only. If any of the circumstances mentioned in this blog apply to you, seek expert legal advice.

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Tax Advantages of Civil Partnership and Marriage – 10 FAQs

Tax Advantages of Civil Partnership and Marriage1. Tax advantages of civil partnership and marriage

Did you know there are tax advantages to being in a civil partnership or marriage? This blog looks at the savings you can make on income tax, capital gains tax and inheritance tax. 

2. “Common Law Marriage” does not exist

If you’re living together you don’t have the same rights or tax advantages as if you’re in a civil partnership or marriage. The law is changing in 2019 to extend civil partnerships to mixed sex couples and they will benefit from the same tax breaks as same sex civil partners and married couples.

3. Tax advantages of civil partnership and marriage

  • You can transfer some of your unused income tax personal allowance to your civil partner or spouse
  • Gifts to each other are free of capital gains tax (CGT)
  • Gifts to each other are free of inheritance tax (IHT)
  • You can carry over your civil partner’s or spouse’s unused IHT tax free allowance

4. Income tax

Transfer £1,190 of your personal allowance to your civil partner or spouse if they earn more than you and save £238 tax (tax year 2018/2019). See this guide to how to apply, including backdating.

5. CGT

Civil partners and married couples can gift their assets to each other free of CGT. A gift of assets to the civil partner/spouse who pays a lower rate of tax will mean they pay less tax on income from the asset, and less CGT if they dispose of the asset. Or transfer assets into joint names and you can both make use of your tax free exemption which in 2018/2019 is £11700.

6. IHT

The threshold is £325,000, the standard tax rate is 40 percent. Leave your estate to your civil partner/spouse tax free and they can carry over your unused IHT tax free allowance and save IHT on £650,000 of their estate.

7. IHT on home left to the children (inc adopted, foster or stepchildren) or grandchildren

The threshold rises to £450,000 and a further £25,000 will be added each year until 2020. This means the combined carry over is £900,000 and increases each year until it reaches £1m in 2020. But if your estate is worth more than £2m it’s less beneficial.

8. Are there any CGT downsides to civil partnership or marriage?

Yes there can be if you own a property each. In the case of cohabitees each property can be a principle residence and so exempt. But if you enter into a civil partnership or get married only one property counts as a main residence. There are strict time limits for avoiding CGT on the other property so make sure you don’t miss out.

9. Do I need a Will?

An expert solicitor can help you reduce IHT or avoid it altogether. See my recent blog Do I Need A Will? Here’s One Very Good Reason.

10. Tax advantages of civil partnership and marriage

Contact expert Wills solicitor, Karen Layland, on 01202 798199 or by email karenlayland@just-family-law.com  for free advice on the topics raised in “Tax Advantages of Civil Partnership and Marriage”. In this 20 minute session we will review your situation and how you can achieve your objectives.

JUST FAMILY LAW are specialist divorce and family law solicitors offering personalised legal solutions. We offer collaborative law which is especially relevant in providing solutions tailored to your family’s needs. This includes same sex couples and their families. Visit our website just-family-law.com The topics covered in this blog post are complex and are provided for general guidance only. Therefore if any of the circumstances mentioned in this blog have application to you, seek expert legal advice.

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Tax And Divorce – Whether UK Or Non UK Resident, You Need To Consider Income Tax, Capital Gains Tax and Inheritance Tax Liability

Our guest blogger, Megan Saksida 

“The impact of tax on divorce can be critical, especially for international families. It’s vital to take expert advice from an accountant when considering a financial settlement. I’ve set out the main points to consider in this blog, and a brief Summary at the end,” says guest blogger Megan Saksida, Chartered Accountant, of Meganomics and lecturer and writer on private client taxes.

Divorcing? There are likely to be tax implications. But firstly, where do you both live?

How long have you been non resident? Do either of you intend to return to the UK? All these questions have tax consequences.

An expat who doesn’t work may find on a “day count” basis he or she is tax resident in the UK despite living elsewhere in Europe. This could be because you go back and forth to the UK.

And did you know you can be resident for tax purposes in more than one country? It could be necessary to consider the Double Tax Treaty to determine which residence takes precedence.

How does Non-Resident Capital Gains Tax (“NRGCT”) apply to your residential property in the UK on divorce?

Residential property is usually the major asset in a divorce settlement. For both resident and non resident tax payers there can be tax implications.

“NRGCT” is charged on gains accruing on disposal of UK property if it is not exempt under main residence rules (see below), and you are not resident in the UK in the tax year in which the transfer occurs.

Please note – the NRCGT rules take precedence over the temporary non-residence rules (see below).

What are the tax rates? Eighteen and twenty eight percent (depending on your personal circumstances), and only gains made since 6 April 2015 are taxed.

There are three methods for calculating NRCGT gains:

  • The default method, which applies unless you elect otherwise. This uses the market value as at 6 April 2015;
  • Apportionment of the whole of the gain/loss over the time the property was owned;
  • The whole gain or loss (which is only advantageous for a loss).

Can UK property be elected as a non-resident couple’s main residence in order to reduce tax on divorce?

Yes, you can make an irrevocable main residence notification on the NRCGT Return. This can apply retrospectively to any period of prior ownership.

Is there an existing nomination? The nomination on the NRCGT Return is treated as superseding it.

Please remember it is essential both of you affirm this nomination to HMRC, irrespective of which party legally owns the property.

If only one of you owns the property you must submit a Return with a written notification from the other confirming agreement to the nomination. This is because the rules state a couple can only have one main residence between them.

What qualifies as ‘the main residence’ in order for the gain to be exempt?

The property needs to be occupied as your permanent residence.

If you are non resident, you will have an additional burden of proof which is the “day count” test. What’s the “day count” test? This is where you are present in the dwelling for at least ninety midnights in a year. And if your spouse or civil partner was in the property instead, this will count towards your total.

Do you have more than one UK residence? All stays at both dwellings count towards the ninety day test.

If the “day count” test is reached and the home is eligible for main residence relief, no chargeable gain arises for UK tax purposes irrespective of your country of residence at the time of the divorce.

But be warned –  your tax position in your country of residence also needs to be considered.

Is the former main residence for CGT purposes still owned by either of you? What’s the significance of the 18 months rule?

If the property was your former main residence for CGT and it continues to be owned by either you or your ex more than eighteen months after the other leaves the property, then tax may be payable when the property is sold.

This means the leaving spouse should take tax advice if you continue to own the former marital home even though you no longer live there.

Don’t forget the NRCGT time limits

An important practical point to note is if you make a NRCGT disposal you must report the disposal to HMRC within thirty days. Tax on NRCGT gains is generally due thirty days after sale.

What about tax on divorce on everything other than residential property? What are the rules?

  • UK residents are taxed on worldwide income and gains.
  • Non UK residents are only taxed on income generated in the UK.
  • Non UK residents are not taxed on capital gains unless they become “temporarily non resident” (see below), although the rules for gains on residences and businesses are different.

Are you resident, or non resident, in UK for tax purposes?

What is the test for residence?

It’s complicated but boils down to day counts, working hours, the availability of a home in the UK, or your personal ‘ties’ to the UK.

How does this apply in practice?

I’ll give you an example. Say if you live in France, own a home in the UK, and don’t work. Your minor children are at a boarding school in the UK and you spend the school holidays with them in the UK. For tax purposes you might be defined as resident in the UK. How is this relevant to divorce? You could be liable in the UK for your worldwide income and gains under the terms of your financial settlement.

During the marriage you may have been non UK resident for tax purposes, but you now wish to return to live in the UK. What does this mean for tax on divorce?

It depends how long you have been out of the UK and a non UK tax resident, and when the marital assets are sold or transferred.

Are you “Temporarily Non-Resident”?

A non UK tax resident living outside the UK is not taxed on their capital gains unless they are deemed “temporarily non-resident”. This happens when you live outside the UK for less than five years, and you were a UK tax resident for at least four of the previous seven tax years prior to leaving.

If this applies to you, any capital gains made while living outside the UK, on assets held before you departed the UK would become chargeable in the year of your return to the UK. This means even if there was no initial liability to CGT because you were non resident for tax purposes, the charge would now apply.

What is the significance of the date of separation on tax on divorce?

It’s crucial.

A trial separation is not relevant, but permanent separation is relevant for both income tax and capital gains tax.

But when is a couple officially separated? For both income tax and CGT there are three possibilities:

  • There’s a Court order;
  • You have a Deed of Separation;
  • You are separated in circumstances in which the separation is likely to be permanent.

The third option depends on your individual circumstances. You will need to provide evidence to show when the decision was made to separate permanently, and it’s not necessarily the date one of you left the marital home.

Sometimes a decision may be made by one partner and not communicated to the other.

The date is crucial, especially for CGT.

What happens when matrimonial assets are distributed in the same year as the permanent separation in the case of a UK resident? 

First of all, income –

Both of you are taxed independently on income earned in the UK, and worldwide, and you have your own personal allowance.

It may be during your marriage you decided to share income from assets unequally to maximise tax efficiency. But on divorce the Court has wide powers to divide assets irrespective of ownership. The assets can be split equally or in other ways.

Please note – any prior declaration of beneficial interest to HMRC ceases to have effect after permanent separation, and you will be taxed according to your actual beneficial ownership.

Secondly, capital –

In the case of CGT, if you transfer assets to each other under the financial settlement in the tax year of the permanent separation, this is on a “no gain, no loss” basis, just the same as during the marriage.

But there’s a rule – you must have lived together at some point during the tax year.

Assets are distributed in a tax year after permanent separation, but before divorce. What are the implications for tax on divorce for a UK resident?

In the case of CGT, if assets are exchanged in a tax year during which you are not living together, but before decree absolute (which brings your marriage to an end), it’s bad news.

This is because the assets will be deemed to be transferred at market value, and CGT could be payable. This is the case even if no money has been exchanged.

What happens if a non UK resident permanently separates in the same year as the assets are distributed?

You are not liable for CGT for any capital disposals in the divorce settlement except residential property (see above) and business assets.

Even if you return to the UK during or after the divorce, the rules for “temporary non-residence” are not relevant, as the transaction is excluded under the “no gain, no loss” rules.

What is the liability of a non UK resident when assets are distributed in a tax year after permanent separation, but before divorce?

Any assets transferred in a tax year during which you are not living together, but before the decree absolute, would not be subject to CGT if you are non UK resident (except for residential property).

But there could be a tax charge in the country in which you live, and local tax advice should be sought.

If you choose to return to the UK and are rendered “temporarily non-resident” (see above) CGT could be chargeable.

What about Inheritance Tax?

Liability to Inheritance tax depends on the date of the decree absolute. Before, transfers on divorce are not chargeable. After, they are only chargeable if there is intent to confer gratuitous benefit.

But be careful if one of you is domiciled UK and the other not. There are restrictions on how much can be transferred and tax advice must be taken.

What about your, or your ex’s, unused IHT nil rate band?

If one of you dies after divorce and hasn’t remarried any unused nil rate band will remain unused.

Maintenance to children and former spouses, and gifts to children. Liable to IHT?

Maintenance to children and former spouses is exempt from IHT, but gifts to children not for their education, maintenance or training, could be chargeable if not habitual, and out of income. It’s best to take tax advice in these circumstances.

In Summary

Always consult an accountant

Whether you live in the UK or elsewhere, always consider your potential liability to tax on divorce. Consult an accountant.

Even if you don’t live in the UK, you can be liable to CGT on the sale or transfer of UK  residential property

Can you claim exemption under main residence relief?

Beware the 18 month rule …

Beware of either or both of you retaining a property, nominated as a main residence, for eighteen months after divorce – you can find yourself with an unexpected CGT liability.

… or being deemed a UK resident …

Even if you don’t habitually live in the UK, the Statutory Residence Test legislation may consider you do for tax purposes. You could end up being liable to pay CGT on the sale or transfer of assets in the UK and elsewhere.

… or temporarily non resident

Think you are excluded from CGT liability because you were non resident for UK tax purposes? If you return to the UK you may become liable because HMRC may consider you were only “temporarily non resident”.

Liable to pay tax in more than one country?

The Double Tax Treaty is helpful on this point.

WARNING – date of separation and date of divorce

The date of permanent separation, and the date of the decree absolute (which brings your marriage to an end), are crucial when considering liability to CGT. Whether you live in the UK or elsewhere, you might find yourself with an unexpected tax bill. You need to consult an expert family law solicitor to navigate these tricky points.

And Inheritance Tax?

Divorce can have consequences for Inheritance Tax liability.

Contact Megan Saksida on +44 7521 082 546 or Email: meg@meganomics.co.uk Contact Joanne Houston of Just Family Law on 01962 217640 for a FREE telephone consultation on any family law issue

JUST FAMILY LAW are specialist divorce and family law solicitors offering personalised legal solutions.

Visit our website just-family-law.com

The topics covered in this blog post are complex and are provided for general guidance only. If any of the circumstances mentioned in this blog might have application to you, you should seek expert legal advice.

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