The government has recently announced that it intends to introduce no-fault divorce laws that will allow couples to divorce without dignity and to thereby avoid needless additional conflict.
Successive governments have prevaricated over this issue (when they have not simply been ignoring it) for over twenty years, so the reform here is welcome. At this stage, it is not known precisely how the new law will work, nor when it is likely to be introduced. At the moment I am advising my clients that it may take between 1 and 3 years, possibly longer to become law. There appears to be broad cross-party support for it, although there will no doubt be some opposition in parliament from certain quarters who either fail to understand or refuse to accept that no-fault divorce will not make divorce easier, it simply removes the conflict from a system where it is already very easy to divorce.
Those opposed to divorce usually argue that no-fault divorce will cause the number of divorces to rise, despite all the evidence from countries where it has already been introduced that the divorce rate does not rise following the arrival of no-fault divorce.
However, the research does show a spike in divorces after the introduction of divorce laws, followed by the divorce rate settling down again to what it was before. This is explained as being the result of people waiting for the arrival of the new law before deciding to start their divorce.
Entirely understandable. The current divorce system involves one spouse having to making pointless and irrelevant accusations about the conduct of the other spouse. All that it does is increase the potential for additional conflict, reduces the chance of reconciliation (why would you want to get back with someone who has made awful claims about you) and distracts the parties from agreeing arrangements about their children and finances.
However, there can be good reasons not to wait. This is not just for people who are tempted to wait until the new law arrives. It also applies to couples who are separating, but would prefer to wait until they have been separated for two years before they get divorced.
When deciding whether to grasp the nettle and get on with the divorce, it is worth bearing in mind the following:
1. You can only get divorced if you are able to satisfy the court that your marriage has irretrievably broken down. If you are not sure, then you cannot get divorced and you may wish to think about marriage guidance counselling. If a marriage is salvageable, you should try to save it. However, you need to be realistic; if your spouse is adamant that it’s definitely over, there is nothing to be gained except pain, heartbreak and expense by failing to accept the reality of your situation.
2. If you and your spouse cannot agree financial arrangements for the future (whether that be by negotiation, mediation or collaborative process), then it may be that the only way to sort it out is an application to the court for a financial order. To do that, there need to be divorce proceedings or judicial separation proceedings underway. (Judicial separation cases are incredibly rare). There are ways to deal with financial issues without divorce proceedings taking place, but they are very rarely used and the court does not have the discretion or breadth of powers available that it does in divorce and judicial separation cases. However, arbitration might be an option for couples who don’t want to divorce yet, but cannot agree financial arrangements; the difficulty with arbitration is to persuade the other side to use the process.
3. Some spouses can fail to take steps to progress the divorce. There can be a delay in issuing the divorce petition at the court or a delay in the respondent filing the acknowledgement of service or in the petitioner applying for the Decree Nisi. My advice to clients is that if the marriage is over, it is usually a good idea to push on. The court cannot make a financial order until the Decree Nisi is in place. It can take many months to get the Decree Nisi, especially if you are unfortunate enough to find your divorce taking place at the Family Court at Bury St Edmunds. It is risky and sometimes impossible to implement the terms of a financial agreement without the order being in place. Having to wait months for the Decree Nisi to be pronounced, and then a further delay after that of 1 to 2 months for the financial order to be made can cause huge problems. Mortgage offers expire, house sales collapse, and tax bills can become more likely.
4. A failure to deal with financial issues for a lengthy period after a couple separate can lead to an expensive tax bill. Normally, there is no capital gains tax if you transfer an asset to your spouse. However, once you separate, the clock starts ticking. Capital gains tax can become due as a result of liquidating assets or transferring them to a spouse following a separation; to avoid this you need to transfer the asset during the tax year in which you separate. Therefore, if you separate on 6 April 2019, you have until 5 April 2020 to transfer the asset to your spouse without incurring any capital gains tax. However, if you separate later in the tax year, that window to transfer the asset shrinks day by day. The moral of the story is – don’t separate from your spouse on 4 April if CGT might be due, as then you only have a single day in which to transfer the asset!
5. Capital gains tax in relation to the matrimonial home works differently. Normally there is no capital gains tax payable as a result of selling your home or transferring your interest in it to someone else as you can rely on the Private Residence Relief. However, once you separate, you currently have a period of 18 months in which to sell the house or transfer your interest in it before you may become liable for capital gains tax. However, that rule is changing; in last year’s budget, the Chancellor of the Exchequer announced that that period will be dropping to 9 months in April 2020, a change that I anticipate will start to affect the vast majority of divorcing couples.
Many people separate and do not realise that these pitfalls can occur. I often have new clients who come to see me for a consultation and tell me that they have not sorted out financial issues yet, either because they did not know how to or because they did not realise the downside of waiting. I often have to give those clients some unwelcome advice that there is going to be a tax bill that they could have avoided if they had seized the initiative earlier and got on with the divorce.
It is therefore vital that if you separate, you seek legal advice from a specialist family solicitor as soon as possible. That way, you can find out what your legal position is and what your options are, even if you then decide that for the time being you do not wish to take any action.
2 March 2019