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Financial considerations in a US-UK divorce


If you’re a US citizen based in the UK and considering divorce, this article sets out the steps for divorce and how to avoid common pitfalls, such as paying taxes twice, being burdened with depreciating assets, and more.

Over the past few decades, it has become popular for US citizens to move around the world and settle in different countries – there are reportedly around 200,000 US-born American citizens living in the UK.

This article will consider:

  1. The importance of planning before filing for divorce
  2. Where to file for divorce
  3. The stages of divorce in the UK
  4. Financial settlement and dividing the assets
  5. Citizens Based Taxation
  6. How to reach financial settlement
  7. Financial planning for an optimal settlement
  8. Key points on types of assets and divorce
  9. Contact us

The importance of planning before filing for divorce

Divorce has become an unhappy fact for many couples, and combined with growing global mobility, it is increasingly common for couples to undergo an international divorce process when ending a marriage – whereby they are eligible to divorce in more than one jurisdiction across different countries.

Ending a marriage is difficult at the best of times. Getting an international divorce brings additional complexities. If you are an American living in the UK, with assets that cross multiple jurisdictions and are contemplating divorce, then it is essential to seek expert strategic divorce planning advice well in advance.

Where to file for divorce

When your finances and assets cross multiple jurisdictions, more than one jurisdiction may be available to you to divorce.

It is important to understand which country maintains jurisdiction for a divorce as the potential outcome can vary greatly: some jurisdictions may be more favourable for you than others.

When it comes to being able to divorce in the UK, it will depend on whether you satisfy certain criteria.  Put simply; are you habitually resident or domiciled in England or Wales?

However, even if you can divorce in the UK, do you want to?

What would provide a more beneficial outcome for you based on your circumstances?

There is more to consider when it comes to assets and your child/children. Even where the divorce process occurs in the UK, the relevant state in the US may get involved regarding the assets that are located within it and arrangements for any children.

The stages of divorce in the UK

The basic steps of a divorce are:

Step 1: File the divorce application for divorce in the English courts

Step 2: Serve the divorce application on your spouse

Step 3: Receive Acknowledgement of Service of divorce application

Step 4: Apply for Conditional Divorce Order (this has to be 20 weeks after acknowledgement of service)

Step 5: Legally end the marriage with the Final Divorce Order being granted (at least 6 weeks and 1 day after step 4)

To avoid any negative outcome of the finances being divided, especially relating to pensions, it is essential that the financial settlement is agreed before the Final Divorce Order is applied for.

How long does it take to get divorced?

The time it takes to divorce – from filing for divorce until it is finalised – depends on the complexity of the finances involved or whether children orders need to be made.

A divorce that is not defended/contested usually takes around six months.

For more complex cases, the process is likely to take longer and can take more than 12 months.

Financial settlement and dividing the assets

When divorcing in England, your worldwide assets will be considered and determined as to whether they constitute marital assets.

The starting point in the UK for the sharing of assets is equality, however, there are considerations that can impact the sharing and shift the division in favour of one or other party in order to satisfactorily meet each party’s needs. Ultimately, the aim is to achieve a clean break between parties and to achieve a fair financial outcome for both parties.

Detailed financial disclosure from both parties is required to effectively analyse the assets to split.  Professional valuations will be made as appropriate for each asset class, whether real estate, investments, or pensions. To work out a fair outcome will also take into account the following:

  • income
  • earning capacity
  • financial resources available to either party
  • financial needs, obligations, and responsibilities of each party.

In most divorce cases, both parties will assess the split of marital assets based on the value of said assets.

But what if various marital assets are not worth the same to both parties, for example, due to tax considerations of the particular assets? US- and UK-connected clients need to take care with when going through a divorce with assets in both jurisdictions.

Citizens Based Taxation

Despite seeming fair at the time, assets received as part of a divorce settlement can turn into a burden without proper understanding of the tax implications.

The US is among a handful of countries that impose ‘Citizen Based Taxation’ on its citizens.  This means that any American citizen, regardless of where they live in the world, is liable to US taxes on their worldwide income. This differs to most countries, such as the UK, that adopt ‘Residence Based Taxation’ – paying taxes where you are habitually resident.

For this reason, it is important that Americans living in the UK take steps to avoid being taxed twice.  This difference underpins the challenges faced by US/UK taxpayers – and those challenges arise in divorce as well as any other financial event you may be faced with.

How to reach financial settlement

There are several ways of dividing the financial assets and future financial provision on divorce. The most appropriate approach will depend on:

  • the volume and class of assets
  • the location
  • any legal or tax complexities connected with the asset
  • whether children are involved.

Options on how to discuss and reach a financial settlement include:

  • Direct discussion between the parties
  • Negotiation between lawyers
  • Facilitated negotiation with a mediator
  • Private arbitration
  • Litigation through the court

In the UK, the court system prescribes a timetable to adhere to in terms of delivering financial disclosure and attending court hearings in a litigation process (sometimes multiple). Should financial settlement not be independently reached between the parties, then the Judge’s decision at the final court hearing will conclude the division of assets definitively and the order will be legally binding on all parties.

We recommend that litigation is the last recourse and only implemented where intervention is absolutely necessary because agreement was not reached in earlier negotiation.  Litigation, especially through to final hearing, is hugely costly – emotionally, financially, and psychologically.

If you are an American living in the UK and contemplating divorce, it is essential to get tailored advice suited to your situation. As international family law specialists, we can advise you on all aspects of divorce to help you reach the outcome you desire.

Financial planning for an optimal settlement

Typically, the goal of both parties is to ensure their respective future (and their beneficiaries’ future) is secure. Going through a divorce without a robust financial plan is likely to give you a disappointing outcome.

Therefore, the first step is to understand which assets are worth more to each party.


MASECO is an independence wealth management firm that specialises in US-UK wealth management. With financial planning, MASECO’s goal is to analyse what we know today and take steps to keep as many future doors open as possible.

MASECO understands what ‘good’ looks like for their clients. In their whitepaper ‘Whitepaper – Divorce – Stepping Towards A New Life’, they explore how to fund a divorce and how to think about expenses once all is said and done.

MASECO does a lot of work with clients to map this out, using sophisticated tools which analyse current assets and liabilities, income, and expenditure – both now and in years to come. They challenge clients on what is most important to them, and look to stress-test various ‘what-if’ scenarios, with the final question always being ‘How much capital do I need today to feel financially secure?’ For most, it is nearly impossible to fathom what X assets today means for them tomorrow. The last thing anyone wants is to realise they have been left short-changed after an already gruelling process.

Once the blindfold is off, clients can work with their lawyers to discuss these financial goals, which feeds into a key part of the proceedings.

Key points on types of assets and divorce

Let’s take a look at various examples of types of assets and how they should be considered in the context of divorce.


By and large, UK- and US-qualified pensions are mutually respected as tax-deferred wrappers. It is not uncommon for the courts to issue a pension sharing order, whereby a pension is split between the two parties.  Carefully consider the consequences of having either a pension debit, or a pension credit, and seek relevant advice.

Suppose a British spouse receives part of a US pension, and is not a US person: Care must be taken from an estate planning perspective, given the exposure to US estate taxes on US assets held by non-resident ‘aliens’.

On the UK side, it is important to consider the Lifetime Allowance (LTA) implications of a pension sharing order, especially if the pension has already been crystallised (typically meaning it has been accessed).  To those in pension ‘debit’ i.e., ceding away part of their pension, it is important to note the remaining percentage of LTA remaining is what presides, so further top ups (even after the debit) can lead to a Lifetime Allowance charge. On the flip side, the party receiving a pension ‘credit’, i.e., being awarded a share, can apply to extend their LTA via an enhancement factor in certain circumstances, but again advice should be sought.

Investment accounts

Investments can take many forms in either the US or the UK.  Outside of qualified pensions, it is usually safe to assume that an account with tax advantages in one jurisdiction does not enjoy those same benefits across the pond. Once again, whilst steps can be taken to avoid double taxation, the more punitive tax treatment on a particular asset will usually preside over the friendlier regime.

As a result, regardless of the structures investments are in, it is important that the underlying investments are as efficient as possible in both the US and the UK.

As an example, a collective investment fund in a UK investment account is likely considered a Passive Foreign Investment Company (PFIC) in the US and is aggressively taxed at the hand of a US taxpayer.  The equivalent opposite is true, where most US-based funds are much more valuable to a US taxpayer than a British counterpart, given HMRC rules on overseas funds. Put simply, an efficient investment for one party can be a real hospital pass to the other, and understanding these differences is paramount when agreeing how a household’s assets should be split.

Real Estate

The same is true for real estate, although this can be more cumbersome to plan around in practice, given the high percentage of many households’ wealth tied up in their home.

If we look at a couple’s main residence, if this is based in the UK, a US taxpayer may have a larger tax bill than their British counterpart. Under current rules, Britons are not taxed on their main UK-based residence by HMRC under ‘principal primary residence relief’. The US treatment for a US taxpayer is not so generous, and again, once the tax authorities have had their say, it may be that the marital home is worth more to one spouse versus the other.

The US tax treatment of mortgages is also an issue to contend with, especially when that mortgage is based in the UK. Currency fluctuations can give rise to a taxable currency gain in the US on a UK mortgage, even if in Sterling terms, the value of the mortgage has remained flat (or in many cases, reduced, as you might expect after repayments). The challenge of currency fluctuation applies to every type of investment for our clients, but the example of a taxable US Dollar gain on a UK mortgage tends to astound those affected. Therefore, in some circumstances, taking over the marital home and its large mortgage exposes the US person to the potential of nasty surprises.

In summary

In the context of divorce, especially where more than one jurisdiction is involved, receiving personal and tailored advice is crucial in achieving a favourable outcome. Above, we have seen that there are many steps in the process, and plenty to think about along the way.

A key role of an advisor, whether a lawyer or a wealth manager, is protecting clients from potential harmful ramifications and being well prepared, especially where more than one jurisdiction is involved. If you are an American living in the UK and contemplating divorce, it is essential to get tailored advice and plan ahead. Each divorce and client circumstance is unique, so contact the team and we will work with you to achieve your desired outcome.

This article was written by Naomi Grimwood, Solicitor at Expatriate Law, and Rory Dorman, Partner and Senior Wealth Manager at MASECO Private Wealth.

Image of Naomi Grimwood, Associate at Expatriate Law

Naomi Grimwood is a family lawyer and provides legal advice on a variety of matters including divorce, financial remedies and complex financial disputes, and private law children disputes. Naomi was previously a qualified finance lawyer in both English and US private practice law firms and international financial institutions, has extensive experience in division of assets across these jurisdictions.

T: +44 207 846 5462


Rory Dorman, Wealth Manager at MASECO

Rory Dorman is Partner and Senior Wealth Manager at MASECO Private Wealth and features in the Spear’s 500. Rory is skilled in developing compelling investment solutions for US expats in the UK, helping to navigate through a wide range of financial complexities.


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