- Despite time pressures, always be clear on the CGT consequences of a property settlement.
- Not all CGT events are exempt under a family law property settlement.
- Avoid agreements to ‘sell and split’.
You are acting for Clive in relation to the breakdown of his marriage with Alice.Clive is a cosmetic dentist and has done very well financially. Alice has also been very successful running her interior design business.
The breakup has not been harmonious. Negotiations broke down after a year of acrimony but the later mediation was successful, if arduous and with little compromise, and with no time to seek outside advice.
One of the bones of contention during the marriage was the different approach to risk. Clive worried mightily about being sued by one of his high net worth clients if the cosmetic dentistry didn’t work out correctly. Alice was much more relaxed about her business.
As a consequence most of Clive’s property was tied up in a trust while Alice owned her assets personally – with one property owned by them jointly. Clive also owned a half share with his sister Ann in a property inherited from their parents.
Clive had a paranoid desire to improve his risk profile by exchanging his half share in both properties for Alice putting listed shares of the same value into his trust. This suited Alice because she wanted to balance up her investments – but problems remained.
While they agreed on the value of the property Clive owned with Ann, they could not, during the mediation despite endless haggling, agree on the value of the property they owned together.
So, it was agreed that the property would be sold with Alice taking all of the sale proceeds. It would then be easy to work out how many shares should be transferred to Clive’s trust.
Although Alice was happy with becoming half owner with Ann she worried about the unhappy relationship that had developed with Ann during Alice’s marriage breakdown.
It was therefore agreed that Clive would declare a trust of his half share with power for Alice to request a transfer when things had improved with Ann.
After a long and exhausting day the mediation agreement was signed.