Probate fee increase…the good, the bad and the controversial
Ant and Oh Heck
You would have had to be living under a rock to have missed the break-up of Ant and Lisa McPartlin this year. Most of us are lucky that when we go through a break up it isn’t all over the news but we do still have to deal with the same issues. Now whilst their divorce and custody battle (over Hurley the dog) will be taking up the majority of their time below are three other issues that Ant and Lisa will be dealing with.
(For ease of reference I will use the terms ‘divorce’, ‘married’ and ‘spouse’ but this article applies equally to civil partners)
On divorce your ex-spouse will be treated (for the purposes of the Will) as if they had died on the date of the decree absolute or dissolution of the partnership. This means that your Will remains valid and your ex will no longer benefit…good news. However, before that moment (whilst you are separated) the Will will still take effect as it is written. Also if you don’t have a Will then under the intestacy provisions your spouse will receive a share of your estate. If you are separating you should take advice and make/amend your Will if necessary.
Ownership of Property
Most married couples own their property as joint tenants. This means that if one party to the couple were to die the other will take full ownership of the property by survivorship. If you have just separated you should take advice about severing your joint tenancy which will split the ownership of the property into two shares and ensure your share passes by your Will. Make sure your Will is up to date though!
Capital Gains Tax (CGT)
Of course tax would be involved! So any transfers of assets between spouses are deemed to be made at no gain no loss for CGT purposes. This means that there is no tax to pay when you transfer any assets to your spouse as they take the asset at the value that it was originally purchased for. However when a married couple separates they only have until the end of that tax year to use the no gain no loss rules when transferring assets. After that any asset transferred will be subject to CGT on any amount the asset has increased in value by.
Whilst you will each have an annual exemption, currently £11,700, to set against gains this may not be sufficient to deal with transfers of all assets including investment properties and investments. Your main home should receive principal private residence (PPR) relief against any gains but this will only be for the period you live there as your main residence and the last 18 months of ownership (due to reduce to 9 months in April 2020). If you move out and the property takes longer than 18 months to sell then you may find yourself with CGT to pay. Whilst this doesn’t cover all CGT issues you may face it highlights the main ones.
So in brief review your Will, check how you own your property and don’t separate towards the end of a tax year!
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