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The effect of divorce upon Wills

Monday, 16 November 2009

The basic rule is straightforward: divorce will treat former spouses as if they were omitted from the Will. No gift will pass to the former spouse; furthermore even if a former spouse is named as executor they cannot act as executor. The remaining terms of the Will (excluding any reference to the former spouse) remain valid.

As always there are always exceptions to the rule!

Since the 1 January 1996, the basic rule is as above - a gift to a former spouse takes effect as if the former spouse had died on the date the marriage was dissolved or annulled unless the Will infers a contrary intention. Thus if the Will contains a gift in substitution, dependent upon the spouse's death, then the gift will take effect consequent upon divorce or annulment.

What about Civil Partnerships?

The Civil Partnership Act 2004 was designed to treat civil partners (who had entered into a formal legally recognised relationship) on an equal footing as a married couple. Accordingly, a dissolution or declaration of nullity in relation to a civil partnership, (unless a contrary intention appears from the Will); any gift to a former civil partner, or appointment of him/her as executor, will be treated as if the civil partner had died on the date of dissolution.

Family Provision Claims

The following applies only in relation to a former spouse of the deceased.

Under the Inheritance (Provision for Family and Dependants) Act 1975 certain individuals may make an application to the Court on the basis that the deceased's Will, or the law of intestacy, does not make reasonable financial provision for them. The applicants include:

a former husband or wife of the deceased who has not remarried.

A former husband or wife will include any person whose marriage to the deceased has been ended by a decree of divorce or nullity in England and Wales or by a decree which is recognised in England and Wales.

Care should be exercised here as in divorce proceedings there is a process called ancillary relief application. The Court has power to make an order that no application, (under the IPFDA 1975 as above), should be made by a former spouse.

Inheritance Tax - divorce and second marriages

Since the 9 October 2007, it has been possible to transfer the Inheritance Tax nil rate band (currently £325,000) between spouses and civil partners - broadly on the death of the surviving spouse (or civil partner), and assuming the nil rate band was available in full from the first spouse to die, then two sets of nil rate bands apply on the second death -viz £650,000 -year 2009-2010.

In order to make a claim, (to transfer the unused nil rate band); the surviving spouse must have been married to the deceased on the first death -divorce will sever the ability to transfer the nil rate band.

On the other hand where a second "husband" marries a second "wife" it is important to distinguish between tax considerations and the interest of the family overall- it is likely that each party to the new marriage has both assets derived from, and obligations to the children of, former marriages.

The ability now to transfer the "unused" Inheritance Tax nil rate band will allow the executors of the survivor husband and wife each to have the ability to claim an exempt amount (equal to not more than double the Inheritance Tax nil rate band) where he or she has been married more than once.

In these instances careful planning is required - HM Revenue and Customs offer no sympathy for those taxpayers who have misinterpreted the rules!

For further assistance please contact Head of our Private Client Department on 020 7611 4848 or by e-mail at nacheson-gray@rollingsons.co.uk to arrange a consultation.