How the court deals with inheritance within divorce proceedings is an issue that arises quite frequently. Clients can be surprised and upset when they find out that they may not be able to keep their inheritance and their spouse may be able to claim a share. Each case depends on the individual facts and circumstances.
There are two types of assets in divorce proceedings, those that are treated as matrimonial assets and those treated as non-matrimonial assets.
Matrimonial assets are money and property, which usually includes the matrimonial home, built up during the parties’ marriage/relationship; this includes money or assets accrued during any period of cohabitation immediately before the marriage. The money or property does not need to be in the joint names of both parties for it to be a matrimonial asset, for example, pensions are a matrimonial asset.
Non-matrimonial assets are money or property which has been acquired outside the marriage for example, an inheritance or a property owned by one party before the relationship began.
All matrimonial assets automatically form part of the “matrimonial pot” which is divided between the parties within the divorce.
Clients are often shocked when they find out that an inheritance can in fact be included in the ‘matrimonial pot’ if it is required to meet the parties needs.
- If inherited assets are put into joint names, say a joint bank account, or used to benefit the family for example by paying off or reducing a mortgage on the family home then it is likely that the inheritance will be included in the ‘matrimonial pot’
- If the inheritance is kept completely separate and is not mingled with family money or assets then it can be argued that the inheritance should not form part of the ‘matrimonial pot’
- If an inheritance is received shortly before the parties’ relationship breaks down it may again be possible to argue that this inheritance should not form part of the ‘matrimonial pot’
- If an inheritance is received after the parties separate it is likely to be excluded as it has not been intermingled and will have been kept completely separate
- A future inheritance, even if the parents are very wealthy, is likely to be ignored as there is usually no certainty when an inheritance would be received and Wills can be altered. If however a future inheritance is known about, is imminent and substantial enough to make a difference, then on rare occasions it is possible for proceedings to be delayed until the inheritance has been received
Despite the above arguments as to whether inherited assets and property can or cannot form part of the ‘matrimonial pot’ there is one very important issue that the court has to consider which can have an impact upon how an inheritance is treated. The court has to consider whether there is sufficient money in the ‘matrimonial pot’ to provide for the reasonable needs of the parties, particularly when there are children. The reasonable needs of each family unit will differ as lifestyles and standards of living are not the same for everyone.
If there is insufficient money then the court will consider whether an inheritance should be used to meet the needs of the family.
If the only way in which the future needs of the family can be met is by taking into account an inheritance, the court can give whatever amount they feel is appropriate to the other spouse. At all times and in all cases however, the court must consider whether any order made is fair to both parties.
As already stated every case is different and the outcome will depend upon the individual facts including:
- The size of the inheritance
- When it was received
- How it was dealt with during the relationship
- Whether it was kept completely separate or was intermingled
- Whether an inherited property has been passed down through generations eg. if the inheritance is a farm
- The length of the marriage
- The circumstances in which the inheritance was received
- AND whether the parties financial needs can be met from the matrimonial assets
If you wish to protect an inheritance received before your marriage you could consider having a pre-nuptial agreement and if you receive an inheritance after your marriage you could have a post-nuptial agreement. Neither of these agreements are guaranteed to protect your assets and you should always obtain legal advice before entering into one.
Our specialist family law team are all members of Resolution and aim to resolve matters in a conciliatory and constructive way. Please contact us and we shall be happy to assist if you have any divorce or family related issues that you would like to discuss.
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