D-Day, in family law, is the first Monday back after the festive period when divorce lawyers are traditionally inundated with calls.
For some unhappy couples, the thought of another Christmas in their current situation is something they cannot bear. Financial issues can also be a cause of arguments and this day usually falls around the time the credit card bill for the festive period drops through the door.
But will next year see a drop in the usual spike in enquiries as couples grapple with the cost-of-living crisis? People may decide to stay together because they think they can’t afford to separate; they might be worried about whether they can fund two separate households, or what the cost of negotiating a separation agreement could be.
Many people live apart for some time without actually doing anything about progressing their divorce. Unfortunately, in most cases nothing gets easier with the passing of time and in some cases, it could be much more difficult to sort things out a long time after you first separate.
Division of financial assets can be especially challenging if matters are delayed. For example, in terms of Scottish divorce law the value of the assets which are shared is the value at the date of separation. In the current economic climate, there is a real risk of the value of assets falling.
That’s particularly stark in relation to pensions. If you had a pension worth £200,000 at the date of separation, your spouse would be entitled to half - £100,000. If the pension has fallen in value by time you are negotiating a settlement, you could be faced with the prospect of your spouse claiming £100,000 in respect of a pension worth considerably less than £200,000. This would undoubtedly make the negotiation of an overall settlement harder.
It may also be the case that financial settlements are more difficult to negotiate with more uncertainty around house prices and mortgage rates. Will one spouse still be able to get a mortgage offer to enable them to buy the other one out of the house?
Having said all of that, there is one change coming down the track which might make it wise to delay the transfer of assets. Under current tax rules, a separated couple can only transfer assets to each other without paying tax if the transfer happens during the tax year of separation. Also, the spouse who moves out of the family home only has a nine-month window to sell or transfer their interest in the house before capital gains tax (CGT) is payable on their share of the proceeds or value.
New rules are set to come into effect on 6 April 2023 which will mean that no tax is payable on the transfer of assets between spouses for up to three years from the tax year of separation. The spouse moving out of the house will also be able to avoid paying CGT regardless of when the house is sold or transferred.
These changes will mean that significant tax savings can be made for some couples if the timing of transfers is delayed until next April.
Regardless of the financial implications around timing, it is best that couples considering separation seek expert advice as soon as possible. While it is a difficult first step to take, an experienced family lawyer will be able to talk you through the options and provide sensible guidance.
There are cost effective ways to talk about the issues which need to be resolved on a break- up – Mediation and the Collaborative Family Law Process can help you to make decisions about the family home, pensions and other financial issues, as well as the crucial aspects of sharing care of your children.
Going through a separation can be extremely stressful, and the earlier couples seek a helping hand the better.