The division of assets is often a thorny issue in divorce. What forms part of the matrimonial ‘pot’ available for division? And what assets should be ring-fenced from inclusion in the financial settlement?
Many people believe inherited money or property should not be in the mix when it comes to divorce. That’s because an inheritance usually derives from one spouse’s own family or loved ones. In one important case White v White, in 2000, the judge explained that inherited wealth “represents a contribution made by one party which is unmatched by an equivalent contribution made by the other.” And there is certainly merit in the argument that it should therefore not be available to the other spouse on divorce.
Family courts however sometimes see things differently, and if you are concerned about splitting an inheritance you should seek advice from a specialist divorce solicitor. The courts will look at the facts of each case to determine whether or not to split an inheritance as part of a divorce settlement. Depending on the circumstances of the case the inherited sum may or may not be used to assist in reaching a fair outcome.
The Starting Point: Matrimonial Causes Act, 1973
Family court judges must look at the factors set out in s25 of the Matrimonial Causes Act when arriving at any decision on a financial settlement. These include:
- The income of each spouse
- Duration of marriage
- Financial needs of the parties
Significantly there is no explicit reference to inheritance in s25. And judges have a wide discretion when deciding matters in financial cases. To shed more light on the question we need to look at some of the cases decided in this area. These demonstrate that in certain circumstances past inheritances may be taken into account when deciding how to split resources on divorce.
Meeting The Needs Of The Parties
The way the factors above are applied to individual cases has been clarified in a number of cases. In particular the case of White v White mentioned above.
There the court decided that inherited property must always be viewed as one of the ‘circumstances of the case’ but the non-inheriting spouse will not have as strong a claim to the property as he or she would if it were clearly matrimonial property (acquired through joint contribution during the marriage). But the judge, Lord Nicholls added a proviso: if the inherited asset is needed to ensure both parties financial needs are met then the fact that an asset is inherited is of much less relevance.
What If Inherited Assets Are Mingled With Marital Property?
In a long marriage it is often the case that an inherited asset will become mixed up with other assets and diminish in significance and even become more difficult to identify or value. For example, an inheritance could be used as a deposit on a home purchased many years ago. In the case of K v L the judge acknowledged this. However on the facts of that case the wife’s huge inheritance (which had dramatically increased during the 21 year marriage was never mixed with the family’s assets. It was mostly made up of shares, which the wife had always kept in her sole name. In these circumstances the court decided the husband was not entitled to a greater share in these assets. He was given an amount that was sufficient for his needs – about £5million, less than 10% of the total assets.
How Can I Protect My Inheritance?
From the above cases and others we can see that the needs of the parties and the welfare of children will always be at the forefront of the court’s mind. If the only way to do this is to split an inheritance then the courts are likely to do so. If needs can be met without recourse to the inheritance then it is less likely to be included in the financial pot available for distribution.
While not a guaranteed way to protect your inheritance, you can help secure it with a properly drafted pre-nuptial or post-nuptial agreement. It is also a good idea to ensure that you keep the inheritance separate throughout the marriage and do not let it become mingled with other, matrimonial assets.