Consciously uncoupling, or thinking about it? With no-fault divorces expected to increase the divorce rate in the UK, what steps should you take now to future proof your estate?

As the “no-fault divorce” finally becomes law in the UK, it is predicted that the divorce rate will rise. The numbers are bound to be pushed up by the COVID-19 lock-down that forced people to live closer together than they ever have. With no escape from each other, many have come to realise they are in a marriage they no longer want to be in. An irretrievable breakdown in the relationship is all that is now required to unshackle yourself from a spouse to whom you no longer wish to be coupled. “Conscious uncoupling” will now be made much easier.

However, as you begin to consider your own situation, do remember to review your estate planning as you head out of the door.

Wills:

The first thing you need to consider is that you need to update your will and if you haven’t done so already, you need to make a will. The good thing is that by law, divorce will invalidate any provision you have made for your spouse in your will. But should you leave it at that? Absolutely not! You should always review your will after a major event and divorce is definitely among the major events that should lead you to review your will. With your spouse now out of the picture, a lot of things will change.

1) Executors: whom do you want to be your executor(s)? Most people appoint their spouse as their executor. You now need to consider whom you should appoint as your executor, whether family members or your professional adviser, like a solicitor, or whether to have both.

2) Trustees: the executors will be the trustees of any trusts in your will unless you provide otherwise. You might feel that you have no trusts in your will, but it can happen by law. If you have children who are below the age of majority then anything you leave them will be held in trust until they reach that age or any other age you have specified in your will. Trusts can also come into effect because someone you left a gift to in your will, died before you and their share went to their children who are under-age. When spouses are not involved anymore, you might need to consider whether you want the same person to be the executor and the trustee. There may be people that you want to be the executor but not to be involved in the long-term management of assets held in trust for under-age beneficiaries.

3) Guardians: the issue of appointing a guardian remains an important issue and takes on added importance. You may have appointed a member of your spouse’s family as the guardian. Now that you have split up with your spouse, family members will usually take the side of the spouse they are related to. Friends will often have to choose sides too. So be careful that the person you have chosen as your guardian or replacement guardian is still the person you want in the new circumstances.

4) Specific gifts: you should review the gifts you made in your will. There are a number of issues to consider. Your gifts may have been influenced by your spouse. You may have left gifts to their family members or to causes they are partial to. Are those gifts still appropriate in your new will? Also, remember, that your estate may be smaller or bigger following the divorce and so you should review whether that gift of £10,000 to a friend still works for your diminished estate. Another issue is that some people make identical wills with their spouses and specify that gifts of money should come out of the will of the second of the couple to die. There is no longer a spouse so that gift and the amount should definitely be reviewed to decide if it is still appropriate.

5) Gifts of residue: gifts of the residue (bulk) of the estate may need revision. If you have children, do you want your children to inherit? If so, at what age? If you don’t have children, it is common to divide the estate into two and give one half to your side of the family and the other to your spouse’s half of the family. Is this still appropriate? Are you on such friendly terms with your ex-spouse’s family that you would want half of your estate to go to them?

6) Definitions: review the definitions used in your will. If you had stepchildren, you may have wanted them to be treated in the same way as your children with your ex. If so, then you may have inserted a definition to say that the definition of children includes stepchildren. With the dissolution of the marriage, is that still appropriate? It is most likely that you would want to remove those provisions.

Inheritance tax

Remember that spouse exemption is no longer available to your estate. Therefore, be sure to review your wills and lifetime gifting to ensure that you maximise the inheritance tax allowances that are still available to you.

Lasting Powers of Attorney:

After divorce, your ex-spouses cannot continue to act as your attorney. That could leave you with no attorney at all. Alternatively, it could leave you with a substitute attorney that you really don’t think should have that role at this point in time. That substitute could be your spouse’s sister. Do you still have a good enough relationship to keep them in that role? If not, you must do something. You will probably have to revoke the lasting powers of attorneys and make new ones provided you still have mental capacity.

Jointly Owned Property:

Most family homes are owned jointly between the couple and usually as joint tenants. That means that the property will pass to the survivor of you and your spouse by operation of law. This will all probably be dealt with in the financial settlement, but financial settlements can take some time to reach. In the meantime, any provisions you make in your will for property held as joint tenants will not take effect. Consider taking steps immediately to sever the joint tenancy, unless there are good reasons not to do so.

 Separated But Not Yet Divorced:

Also bear in mind that a vulnerable time is whilst you are waiting for the divorce to go through. You may be separated from your spouse but during that time, the will remains valid and all provisions you have made in favour of your soon-to-be-ex will take effect. Therefore, it would be wise to start reviewing your estate planning immediately you decide to split up. Unfortunately, I hear so many people saying they are waiting for the divorce. I actually had a situation where the woman died before her divorce went through. Their home was held with her husband as joint tenants and went to him by law. Her children had to go to court to try and get a share of the property. 

The same thing with your Lasting Powers of Attorney. Make the changes immediately by revoking your Lasting Power of Attorney in which you appointed your spouse as your attorney. Don’t wait for the divorce. You would not want that nearly-ex to be the one with the power to decide whether your life support should be switched off if you slip, hit your head and fall into a coma whilst you are arguing bitterly over who gets to keep the prized record collection.

A New Spouse or Partner:

Create safeguards around your estate when you meet someone new. Consider whether the use of trusts will give you the ring-fencing you need to protect the capital for your children or other beneficiaries. Remember that your marriage to that person will invalidate your will made after your divorce from your ex. For it to remain valid, you must say that the will should not be invalidated by your marriage to that person.

Review Now:

Don’t let your quickie no-fault divorce come back to haunt you. Oh yes, of course, you’re not the one that will deal with the mess left behind. It will be your loved ones. Take stock and review your estate planning now! And don’t be in such a rush to leave that you forget to deal with this important task.

To discuss this further, please contact gunnercooke Private Client Partner Remi Aiyela here.