Reform of divorce law was stalled following the proposed prorogation of Parliament, and the Divorce, Dissolution and Separation Bill is not yet law. With Parliament reassembled it is likely that this Bill will progress as it has widespread cross-party support and will enable couples to file for “no fault” divorce within six months of an application.
Current law dates from the 1973 Matrimonial Causes Act and requires grounds for divorce to be made, which may include irretrievable breakdown, adultery or behaviour which makes it unreasonable for the parties to remain married. Where there are no grounds, the couple must be separated for 2 years if both consent to the divorce, but where one objects, separation of 5 years.
The proposed law will result in irretrievable breakdown being the sole ground for divorce. Couples may apply jointly or singly but it will no longer be possible for one party to contest the divorce. It is hoped that the new approach may remove some of the acrimony around divorce and separation. It will also revise the process for the ending of civil partnerships which mirror the rules on divorce.
It will still be possible for a couple to change their minds and to allow for a period of reflection. There will be a minimum period of 20 weeks between application and the granting of a decree nisi. There will be a further minimum of 6 weeks between the decree nisi and decree absolute.
Financial arrangements do not have to be settled by the time the decree absolute is obtained but it is advisable for couples who are decided on divorce to consider the financial implications of their decision before applying for the decree absolute. Marriage still carries many financial benefits for the couple but once the decree absolute is furnished, they are no longer married and these benefits fall away.
For example, if one party has a defined benefit pension scheme, benefits are often only payable on the death of the member to the legal spouse. If there is no spouse and no eligible children to receive a dependant’s pension, the family could end up with no payment from the scheme following the member’s death. The same applies to State pension benefits. A legal spouse would be eligible, on death of the other to receive a State Bereavement Support Payment. If the State pension came into payment before April 2016, a dependant’s pension in respect of the earnings- related State pension is payable to a spouse but not an ex-spouse.
As part of the financial arrangements the couple can agree a share of pensions, whereby one spouse transfers some of their benefits to the other or these are offset against the value of other assets as part of the financial settlement but if death intervenes between the decree absolute and the consent order determining the financial arrangements, the ex- spouse can be short changed.
Divorce also undoes the tax privileges which married couples and civil partners enjoy. Husband and wife may:
These tax breaks are not a reason to remain in an unhappy marriage, but they are lost on issue of the decree absolute. Divorcing couples and their lawyers need to agree the split of assets and ensure that suitable arrangements are in place well before the decree absolute is applied for.
LEBC can assist both parties in arriving at a financial settlement, taking all these factors into account and we have developed cash flow planning models especially for this purpose. This enables both parties to explore differing scenarios, taking account of the needs of each, asset values, taxation, realistic expectations of investment growth and affordability of mortgage debt.
Director of Public Policy, LEBC
Please remember, no news or research item is a recommendation or advice to buy. LEBC Group Ltd is not responsible for accuracy and may not share the author’s views. All information is based on our current understanding of taxation legislation and regulations. Tax rates and allowances may change in future and depend on individual circumstances. The Financial Conduct Authority does not regulate Tax Advice or Cashflow Modelling.Back to News & Views
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