What happens to my Will and inheritance tax if I divorce or legally separate?

The effects of divorce or judicial separation on succession plans vary depending on which process has been followed.  At the end of a divorce, the marriage has legally ended and terms are set as to the division of assets. A judicial separation follows a similar, albeit shorter, process to divide the couple’s assets but is different from a divorce in that it does not legally end a marriage.  The legal marriage continues even though the couple are formally separated. Couples might prefer a judicial separation over a divorce for any number of religious, cultural or personal reasons.

However, because of this difference, your Will or inheritance tax position will be affected differently depending on which process has been followed.

What are the effects of divorce?

When a couple is divorced, the marriage is legally ended and they are considered to be unconnected individuals. Divorce itself does not revoke a Will and each party’s current Will remains valid, but unless the Will states otherwise, their ex-spouse is treated as if they had died at the time that the marriage was dissolved. This means that they cannot benefit from the estate.

Usually, when a couple make Wills, they will leave assets to each other and then provide for what should happen if the other has died before them. If they haven’t included these provisions, the rules of intestacy could apply. These rules apply where a person has no valid Will and stipulate who should benefit from their estate, even though this may differ to their wishes.

For inheritance tax the spousal exemption will no longer apply once a couple is divorced and their individual estates will benefit only from their individual allowances.

What are the effects of judicial separation?

If one party dies intestate (without a valid Will), the effect is the same as if the couple had divorced. The surviving spouse is treated as though they died first and therefore they cannot benefit from the estate.

However, where one party dies with a valid Will, that Will is unaffected and the surviving spouse is still capable of benefitting under the Will. So, if a couple obtain an order for judicial separation and then do not review their Wills, it is possible that if one party dies, the other will receive part or all of their estate. Whatever they receive will be free from inheritance tax due to the spousal exemption.

Similarly, if a couple obtain an order for judicial separation and they both have Wills, if one party does not benefit under the terms of the other’s Will, that party could make a claim for financial provision from the estate under the Inheritance (Family and Dependants) Act 1975 even though there is a decree of judicial separation.  In these circumstances, the provision available is limited compared to that of a spouse where there was no separation.

What if I want to remarry?

Marriage revokes a Will unless that Will includes specific wording in contemplation of that marriage. If you remarry without this, any existing Will that you have in place will no longer be valid and you should consider creating a new Will.

If you are going through a divorce or judicial separation and would like to discuss your Will, please contact us at 01622 698000 to speak to a member of the Tax & Estate Planning team.