Judicial separation 

What is judicial separation? 

Judicial separation is a means of officially recognising a couple’s separation, without legally ending their marriage. A marriage can only be legally terminated by the granting of a Final Order in a divorce or dissolution of a civil partnership.  

A Judicial Separation Order formally records the separation of a parties’ union. By judicially separating, the court can issue orders in relation to the division of finances and property, as well as child arrangements, which are akin to orders ratified by the court upon divorce. 

Unlike divorce, there is no requirement to prove that a marriage has broken down irretrievably. Additionally, a Pension Sharing Order cannot be obtained after judicial separation, as the parties remain legally married. This could be attractive for those couples wishing to preserve pension rights that would otherwise be lost upon divorce. 

Notably, remarriage is not permitted following judicial separation unless and until a Final Order is granted. Attempting to remarry beforehand would constitute bigamy, which is illegal in England and Wales. 

Why would you opt for a judicial separation as opposed to a divorce? 

Most couples wishing to separate opt for divorce over judicial separation because they want to sever all ties to their ex-partner- financial and/or otherwise.  

However, some couples do favour judicial separation. This may be due to religious beliefs that oppose divorce, because they have been married or in a civil partnership for less than one year (and are therefore not yet eligible for divorce), or because they want more time to carefully consider the decision without being bound by the strict court timetable that applies to divorce proceedings. There are also tax benefits to judicially separating, which do not apply to divorcees (more on this below). 

Applications for a judicial separation are slightly cheaper than for a divorce. Currently, a legal separation costs £415, whereas a divorce application costs £612.  

Couples who have judicially separated may subsequently proceed to formally divorce or dissolve their civil partnership. 

Inheritance and judicial separation 

Judicial separation and divorce have slightly different succession consequences on the death of one of the parties. If a couple judicially separate and one partner dies intestate, the surviving spouse will not inherit a share of the deceased’s estate. This mirrors the situation upon divorce.  

However, unlike divorce, judicial separation does not affect gifts made in Wills. Therefore, if a spouse dies after a judicial separation, having left a Will that bequeaths some or all of their estate to their surviving spouse, the surviving spouse will still inherit, regardless of the judicial separation. In the case of a divorce, a named spouse in a Will is treated as if they had predeceased the testator, and therefore, they will not inherit any part of the estate. 

In cases where an individual dies leaving a Will that does not make provision for their judicially separated spouse, the surviving spouse may file a claim against the deceased’s estate under the Inheritance (Provision for Family and Dependants) Act 1975. Such a claim would be limited to what the court deems a reasonable financial provision. 

Tax implications 

The tax position is equally inconsistent. For Inheritance Tax (IHT) purposes, a couple who have judicially separated are still entitled to claim the spouse exemption. Therefore, lifetime gifts, or gifts made in a Will, will not attract IHT on death. By contrast, the Final Order in a divorce nullifies the spouse exemption for IHT purposes. Gifts between former spouses are therefore within the scope of IHT. 

To confuse matters further, a different approach is taken for Capital Gains Tax (CGT).  Transfers between spouses are usually treated as taking place on a “no gain no loss” basis, meaning that no tax is due on the transfer. Any gains are therefore deferred until a later disposal by the recipient. 

However, this treatment only applies where: 

1. the couple are living together as a married couple / civil partners 

2. the transfer is made within three tax years of the couple ceasing to live together as a married couple / civil partners 

3. the transfer is made in accordance with an agreement or order made in connection with the couple’s divorce, annulment or judicial separation. 

A transfer made between a couple who have been judicially separated after three years will therefore potentially be subject to CGT, even though it will qualify for the spouse exemption from IHT. 

Conclusion  

Deciding between judicial separation and divorce/dissolution of a civil partnership requires careful consideration. Each option has different tax and practical consequences. Clients considering judicial separation should carefully consider: 

1. What impact this will have on their existing Wills / succession arrangements 

2. the tax consequences of any asset transfers between them 

3. if the couple own any foreign assets, how their judicial separation will be treated overseas. 

For further advice on judicial separations or the associated tax implications, please contact: Isobel Inkley and Alex Hunt.