I issued financial proceedings connected with my divorce, hoping to share in the significant wealth my ex-husband accumulated during our marriage. However, he has passed away with the case still ongoing. Will I still be able to pursue my unadjudicated claim?
Sarah Jane Boon, partner at Charles Russell Speechlys, says the law in England and Wales is absolutely clear that a financial claim made during a marriage, or following a divorce, expires with the death of the respondent to the claim.
The law is also clear that a financial claim connected to a divorce cannot be commenced by a person whose ex-spouse has already died.
In spite of those facts, the waters are muddier in situations like yours when a financial claim had already commenced but not yet been adjudicated at the point of an ex-spouse’s death.
As the law stands, your unadjudicated financial claim will not survive the death of your ex-husband. However, in a similar case recently, a High Court judge said he would allow the wife permission to appeal to the Supreme Court, with a view to changing the law.
This was because the judge considered that a financial claim connected to a divorce could not properly be distinguished from other (arguably more speculative) civil claims that would survive the death of the respondent to the claim.
It remains to be seen whether the wife will proceed with an appeal but, if she does, and if the Supreme Court agrees with the High Court judge, that decision would have wide-ranging ramifications — including for you. It would permit a spouse to continue a financial claim connected to a divorce against their ex-spouse’s estate, following their death.
While court procedures often take significant time, there are other avenues you may be able to explore in the meantime. For example, you may be able to commence a new claim, which is unconnected to your divorce, under the Inheritance Act. This is provided that your ex-husband was domiciled in England and Wales when he died, you have not remarried and you bring your claim within six months of the date of the grant of probate.
That said, even if you are eligible to make such a claim, it may not entitle you to share in the significant wealth your ex-husband accumulated during your marriage. An Inheritance Act claim would limit you to arguments about whether reasonable financial provision had been made for you by your ex-husband.
In your position, watching closely to see if the Supreme Court has the opportunity to set precedent for these cases will be the priority. At the moment, it’s relatively unlikely that your financial claim can be pursued.
As new arrivals, will we need to pay UK tax?
My family — my partner, two teenage children and I — will be moving shortly to the UK under the government’s resettlement route. We will leave a property in Hong Kong that will be let to extended family members. They will stay there for the time being, though we may sell that property if they choose to follow us to the UK. We will bring considerable savings and assets with us. Will we have to pay tax in the UK on them? Will tax be payable if we sell our property at a later date?
Laurence Parry, a partner in the tax team at accountants, business and financial advisers Kreston Reeves, says you don’t have to pay tax on assets that you own, or income arising before the start of the tax year in which you become UK resident. You may, however, have to on the sale of your property. The UK’s “non-dom” arrangements may be helpful in your situation.
UK residents are, by default, taxable on worldwide income and gains but if not UK domiciled, they can claim the “remittance basis”. Foreign income and gains (FIG) arising and kept abroad are not subject to UK tax. This includes any rent, but also income and gains arising from investments in overseas companies.
Domicile rules are notoriously complex. It can require looking at your parents’ and grandparents’ background as well as your own history of tax residency.
For the first seven years of tax residence, a claim to non-dom status is at limited cost (a maximum of £7,500 per year). After seven years, the taxpayer has to pay £30,000 for years eight to 12, and £60,000 a year for years 13-15 to claim the remittance basis. After 15 years, the remittance basis ceases. Every year the taxpayer, while they are eligible, decides whether to claim the remittance basis.
Also, if local tax is paid on the rental or sale of the property, this can be offset against a UK liability. The net cost might mean that it’s not worth claiming the remittance basis.
“Kept abroad” means just that and “use” is widely defined — for example, use of a credit card which is repaid from an account abroad which includes funds arising after taking up UK tax residence is a taxable remittance.
It’s crucial to identify whether foreign income and gains is used in the UK. The UK has onerous rules on identifying the tax status of cash from accounts where pre- and post-residence funds are mixed. Post-arrival funds should be separated from pre-arrival amounts. Establishing the accounts can be the most complex part of the process, but segregation before arrival can simplify matters later.
Gains should be realised before the tax year of arrival to boost the funds that can be tax-free in the UK. Even if it’s not to be immediately used in the UK, increasing the base cost of assets can be helpful. Local advice should be taken to ensure this does not create issues.
HMRC frequently asks taxpayers to prove that funds used in the UK are from pre-arrival sources. Records should be kept to demonstrate this.
The opinions in this column are intended for general information purposes only and should not be used as a substitute for professional advice. The Financial Times Ltd and the authors are not responsible for any direct or indirect result arising from any reliance placed on replies, including any loss, and exclude liability to the full extent.
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My wife and I will turn 70 this year, making us think about inheritance. We are worried about “intergenerational fairness” given that our two children, who are married and in their 30s, could benefit from financial assistance. We are considering providing money for property purchases and business ventures, but we don’t fully understand the ramifications, including how the tax system might help or hinder this. Any guidance would be greatly appreciated.
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