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Do I have to split my wealth 50/50 with my husband?

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I have just started a very acrimonious divorce. We have no children, and signed no prenuptial agreement as we married very young, but I am significantly the wealthier party. What do I need to consider when trying to reach a financial settlement?

Matthew Brunsdon-Tully, partner and head of family law at Wedlake Bell, says your question implies you built up your wealth during the marriage. If so, the starting point, and usually the end point, is that it will be divided equally, subject to arguments about need, which can lead to a “departure from equality”. It does not matter in whose name any particular assets might be when the marriage comes to an end — although it may be relevant for you, say for tax reasons.

The court assumes parties to a marriage made equal contributions, even if they have no children. This is because if the courts had to evaluate contributions to a marriage in every case, the system would become even more bogged down by arguments about who contributed more, financially or otherwise, than it is. Resources built up during a childless marriage remain subject to the sharing principle. The sharing principle does not discriminate against people who do not have children.

However, in terms of departing from equality on the basis of one party needing more than half, the most important factors will be the duration of the marriage and the marital standard of living. The longer you are married and the higher the standard of living, the more likely it will be that there will not be an equal split of assets. It will also depend on how much wealth is divided and any potential income streams.

In short, there is not one single lodestar, but looking at this constellation of factors should help you to get a feel for where your situation fits on a spectrum. A specialist family lawyer with experience of how judges exercise discretion could help you assess this. Having a clearer idea of potential outcomes will help you to negotiate a settlement with your spouse.

One caveat is that if some or all of your wealth has been inherited, gifted or brought into the marriage, it will be ringfenced from sharing. The sharing principle does not apply to “non-matrimonial” property. Again, however, you will need to consider whether sharing what is left is sufficient to meet your spouse’s needs. Because, again, the court can either share marital property unequally, or dip into non-matrimonial property, to meet needs.

Do I have to report my virtual world assets in the real world?

I recently read about potential income streams generated by so-called “landlords” in the metaverse [a virtual world accessible though the internet]. Given the crypto crash, virtual land plots look comparatively attractive. But I’ve held back from diving into the virtual universe through fear of being caught out by potential tax on any income or profit I manage to make and other risks. Will I have to report my virtual assets and income to tax collecting bodies such as HM Revenue & Customs?

Robert Mace, partner at Saffery Champness, says the metaverse is a broad, ever-evolving term typically referring to virtual reality spaces where users interact with each other and the environment, engage in commerce, and own digital assets.

Headshot of Robert Mace, partner at Saffery Champness

Some metaverses allow the user to own virtual plots of land, which can in some cases produce income for the landowner. Virtual land purchases are typically structured as the acquisition of a non-fungible token (NFT), a tokenised representation of your unique piece of virtual land.

The taxation of metaverse income or capital gains is not specifically addressed in legislation or HMRC guidance, so we must try to apply general tax principles and HMRC’s crypto internal manual to this scenario.

Most metaverses have their own associated cryptocurrencies, such as MANA within the “Decentraland” metaverse. You need MANA to purchase virtual land and it can be exchanged for real-world currency or other cryptoassets such as bitcoin.

It is well-established that cryptocurrencies are chargeable assets for CGT purposes, and exchanging these for real-world currency or other cryptoassets could trigger taxable events. We would also expect the sale of NFTs representing metaverse assets to be a CGT-chargeable event.

If your metaverse land produces income, this is likely to be subject to income tax. The specific section under which the tax is charged will depend on your activities within the metaverse. If you are operating a trade — for example, you have a virtual shop selling goods or services — then you should expect your profits to be taxed as trading income.

Passive income from “renting out” your virtual land could be taxed as miscellaneous income. You should not expect this to be taxed as property income, unless it is a digital representation of an underlying rental agreement on a bricks-and-mortar property.

Depending on the level of your income or gains in a given tax year, you may need to report this to HMRC in a self-assessment tax return. You should seek advice to determine your reporting requirements.

Under HMRC guidance, for UK tax purposes cryptoassets are considered to be located where the owner is tax resident. For UK tax resident or domiciled individuals, this means that cryptoassets could be subject to inheritance tax at a rate of up to 40 per cent on death. For CGT purposes, your cryptoassets will be rebased to their market value at the date of death. Executors for individuals holding cryptoassets on death should seek specialist advice.

Finally, the OECD has published a framework for sharing details of cryptoasset ownership and transactions between tax authorities around the world, to combat tax avoidance. This has not yet been implemented, but you should be aware that this could be introduced in the future.

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.

Our next question

My partner and I were unmarried and had no children and when he died this year I discovered that he had never made a will. His brother is the only person who will receive his inheritance because he is the only surviving relative. I know that my partner would have wanted to help support me after his death. Is there anything I can do?

Do you have a financial dilemma that you’d like FT Money’s team of professional experts to look into? Email your problem in confidence to money@ft.com

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