Divorce

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Trusts and Inheritance Tax

Guidance

This note considers the inheritance tax (IHT) implications of divorce, or possible divorce, both in relation to the parties themselves and other relations whose lifetime planning choices may be influenced by concerns about a divorce in the family. All references to divorce apply equally to the dissolution of a civil partnership.

The terminology surrounding divorce changed for divorce applications issued on or after 6 April 2022 after the Divorce, Dissolution and Separation Act 2020 came into force. A decree absolute is now known as a final order and a decree nisi is now known as a conditional order.

The basic capital gains tax (CGT) position on transfers of assets on divorce is covered in brief for completeness.

IHT consequences of transfers of assets on divorce

Any transfer between spouses made on the breakdown of a marriage is covered by the spouse exemption if made in advance of the final order.

On some occasions, assets are not transferred until after the divorce is finalised (particularly where the parties have gone to court to

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Emma Haley

Associate at Boodle Hatfield LLP

Emma Haley is a senior associate solicitor at leading private client firm, Boodle Hatfield LLP, renowned for providing first-class and practical legal advice to wealthy clients around the world.Emma has many years experience in dealing with all aspects of wills, probate, capital taxation and succession planning as well as UK and offshore trusts. Emma currently heads up a technical know-how team and is a regular writer and lecturer on estate planning and inheritance tax and also a member of the Society of Trust and Estate Practitioners.

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Divorce

Divorce