Separating at any time of life can be a very difficult process however in later life it can feel as though you are more vulnerable as your financial security is threatened.
Those separating in their 30s, 40s and 50s have the benefit of time to go out and earn an income to provide for their future without the other. Children are often a relevant consideration for those in this demographic but generally there is more money to be earnt following separation to provide for their needs.
This is not necessarily the case for those in their 60s, 70s and older. These individuals are looking towards retirement and the income stream may not be as fluid as it once was. Employment prospects reduce and health can play an important role too. There is however likely to be more available capital (perhaps equity in the family home) and hopefully with good financial planning in the earlier years, a fair pension pot.
When separating, consideration always has to be given to whether it is appropriate for a divorce to follow. Those in their 30s and 40s will almost certainly want this but the same cannot be said for those in later life. If a couple decide to separate in later life they can still divide their assets without divorcing and although the fact that they are still married would prevent a future marriage this is not necessarily something that they will be considering. In addition, there could be financial benefits and tax benefits to remaining married but living separately.
Where a couple remains married and they give all of their assets to each other on death, they can benefit from the transferable Nil Rate Band, which will reduce the amount of Inheritance Tax payable. The Nil Rate Band is the value of your assets on your death which is not taxable. Anything over and above the Nil Rate Bank is taxed, usually at 40%. Depending upon the circumstances the married couple, they could be entitled to a Nil Rate Band of up to £850,000 for 2017/2016 on the death of them both. It is very important that advice should be taken from a Solicitor specialising in Wills given the complexity of this area of the law.
If you are concerned about giving all of your assets to your spouse you are separated from but wish to benefit from the transferable Nil Rate Band, you may wish to consider the use of a Trust whereby you give a right to the income of the capital value of your assets and on the death or re-marriage of your spouse (after your death), the capital value of the assets pass to your named beneficiaries. Again, it is important you take advice from a Solicitor specialising in Wills as you will require tailor made advice.
One possible drawback of not divorcing on separation is that once the assets have been divided (advisably done under the terms of separation agreement), there would be no clean break. A clean break does not automatically follow a divorce and specialist legal advice should be taken on securing a clean break and preventing future financial claims against current assets and one’s estate on death during the divorce process however there is no option to secure a clean break without a final decree of divorce (Decree Absolute). The importance of the clean break is to stop the ex-spouse making a claim against the other spouse’s death.
Separating couples also have to consider what happens to their estate on death. If they are separated but remain married and do not have a will then all of their assets would still pass to the surviving spouse on death. Having a Will drawn up may prevent this regardless of whether married or not. However, it is still possible, where you remain married, that your surviving spouse could make a claim against your property and money on death and may be successful in being awarded part of your assets. You should consult a Solicitor specialised in Wills to obtain advice in how best to draw up your Will in order to make it as difficult as possible for your surviving spouse to obtain any monies from your estate on your death.
It is important to give careful consideration to the options available on separation as a divorce is not the only one. If you would like further advice as the options available on separation at any time in life please feel free to contact Jennifer McNeil who is an accredited Resolution family law specialist on 0116 201 8566.
If you would like further advice in regards to Inheritance Tax, Trusts and making a Will, please feel free to contact Samantha Downs on 0116 2628596 or firstname.lastname@example.org