Sehjal Gupta – Private Client Director
DD: +44 (0)207 4651934
Traditionally when one is contemplating divorce, a family lawyer would usually be the first port of call in terms of advisers. However, clients need to also consider turning to their accountants, who already have an insight to their financial affairs and are a natural point of contact to turn to during what is an emotionally and financially trying time.
It’s also important to note that accountants are also able to recommend a financial course of action that is likely to be beneficial from a tax perspective.
Tax has a significant impact when splitting assets
Clients going through a divorce should understand that when it comes to asset-splitting, tax has a significant impact on the overall financial settlement. We work closely with lawyers and other professionals on divorce cases, but in our experience we (accountants) are often engaged too far down the process and simple tax planning points are missed. Simply put, the earlier a client comes to us, the earlier we can help them to begin financial planning for their future.
In July 2022 the government announced proposed changes to the timing of the CGT relief available to spouses[AG1] who are separating. The changes, if passed will mean that from 6 April 2023 spouses transferring assets between themselves who are in the process of separating will be given up to 3 years after ceasing to live together to make transfers to one another on a no gain, no loss basis. Furthermore there will be unlimited time where the assets are subject to a formal divorce.
This will of course be welcome news to couples who are going through a separation and will remove the additional stress of needing to transfer assets within the tax year of separation in order to avoid unnecessary CGT.
Where should clients focus?
When going through a divorce there are a number of key areas clients should focus on. These include:
- Income sources
- Valuations and
- Wealth planning.
Divorce is undoubtedly a testing time; emotionally, financially and mentally which makes it even more important to have the right advisers and in effect ‘the dream team’ in place to help in making the whole process easier to deal with.
Planning for your future
I have a particular focus on divorce and advisory functions for non-UK domiciled individuals and International High Net Worth Individuals (HNWI), many of whom intend to move to or from the UK.
I believe as accountants, we are in a privileged position to develop long-term relationships with our clients who see us as their trusted adviser and a reliable source of #BrighterThinking. Not only do we understand the numbers, but we have the resources and experience to analyse financial information and provide sound planning advice for the future.
For example, when considering the future needs of a family, we will consider all parts of the family dynamic including the future needs of children e.g. education, inheritance tax planning (IHT) and all significant assets (including the family home).
With an extensive network of lawyers and key contacts, Menzies can assist to ensure our clients work with family lawyers that are most suited to their requirements and have the right team in place to ensure that they are in the best position for their future. At Menzies everyone genuinely cares about their clients and we are in a position where we can make a difference and do the right thing by them.
In these unprecedented financial times with the cost of living crisis, and economic uncertainty, many families are facing financial distress and uncertainty about their future position. This, combined with many spending longer than usual at home with family members can often cause unrest in relationships and marriages. Before making any life-changing decisions in such uncertain times, please do ensure you get advice.