Inheritance & Divorce – Can I Protect It From My Spouse?
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In this article, we will look in more detail at what happens to inherited assets in divorce and answer the popular question “Can I protect my inheritance from my spouse”.
Is inheritance included in a divorce settlement?
As a rule, assets that are acquired during a marriage or a civil partnership are added to the ‘matrimonial pot’ and then divided upon divorce or dissolution.
However, when it comes to inheritance and divorce, any assets that have been inherited are often treated differently by courts in the context of divorce.
The precedence for this was set out in the case of White v White in 2000 which stated:
“This distinction is a recognition of the view that property owned by one spouse before the marriage, and inherited property whenever acquired, stand on a different footing from what may be loosely called matrimonial property.”
Can I protect my inheritance from my spouse?
When it comes to divorce settlements in the UK, the issue of including inheritance can be complex.
Many individuals wonder, “Can I protect my inheritance from my spouse in the UK?”
Inheritance can be considered a marital asset subject to division in divorce proceedings, depending on various factors.
However, there are steps individuals can take to safeguard their inheritance.
Seeking legal advice from a qualified family lawyer is essential to understand your rights and explore options such as prenuptial agreements or trusts that can help protect your inheritance in the event of a divorce.
However, as shown by the factors highlighted above, neither of these methods is guaranteed to protect inherited money after divorce.
Why was White v White important?
White v White is an English family law decision by the House of Lords and is regarded as a landmark case in the redistribution of finances as well as property on divorce.
Landmark cases are important because they change the way the constitution is interpreted – decisions made by the Supreme Court are referred to and influence how judges rule in new cases.
What principle did the House of Lords reject in White v White?
The landmark case involved a couple who were granted a divorce in December 1995 and had assets exceeding £4.5m which was deemed more than needs for their reasonable requirements.
During the case of White v White, the following rationale was set out:
When considering the division of the matrimonial pot, inherited wealth (considered ‘non-matrimonial property’) will be treated differently to assets acquired through work, property, investment, and business endeavours during the course of the marriage (called ‘matrimonial property’) in any divorce settlement. The court acknowledged the view, widely but not universally held, that:
“Property acquired before marriage and inherited property acquired during marriage come from a source wholly external to the marriage. In fairness, where this property still exists, the spouse to whom it was given should be allowed to keep it. Conversely, the other spouse has a weaker claim to such property than he or she may have regarding matrimonial property.”
In other words, the judge should take inherited wealth (considered ‘non-matrimonial property’) into account and should decide how important it is in the particular case.
The nature and value of the property, and the time when and circumstances in which the property was acquired, are among the relevant matters to be considered.
However, it should be noted, that this factor can be expected to carry little if any weight in a case where the claimant’s financial needs cannot be met without recourse to this property.
Is my spouse entitled to my inheritance when we get divorced
A divorce settlement can potentially include an inheritance, though the partner who inherited will argue that inherited assets are not part of the matrimonial pot of assets that is to be split.
When it comes down to it, if money is inherited by either husband or wife during the marriage, whether or not it will be added to the matrimonial pot will depend upon several factors, including:
- Passage of time – In a long marriage, where either party brings non-matrimonial property (money from inheritance) into the marriage, the source of these assets will become less important as time goes by and will gradually come to be seen as matrimonial property.
- Mingling of property – Where the non-matrimonial property ends up being intermingled with matrimonial property over time so that it becomes difficult to distinguish one from the other, it is more likely that it will all be added to the matrimonial pot. This could be where a portion of the inheritance is used to purchase an investment as joint stakeholders, which then significantly increases in value over time.
- Matrimonial home – If an inheritance is used to purchase a matrimonial home, this is more likely to be considered as having been added to the matrimonial pot and divided accordingly.
However, the factors above will generally only come into play if the matrimonial assets are adequate to meet the needs of both parties in terms of a financial settlement.
If the matrimonial property is insufficient, then the non-matrimonial property is more likely to be added to the overall matrimonial pot in order to cover the financial needs of both parties following the divorce – this is especially the case where there are young children involved.
It is important to note that there are no definitive rules when it comes to inheritance and divorce; the outcome will always be decided on the facts of the individual circumstances.
Is future inheritance after divorce considered?
In general, future inheritance is not taken into account when it comes to deciding on a divorce settlement.
However, if a significant future inheritance is known about and expected, the courts may delay a decision on the final sum.
More importantly, if one party suddenly comes into a large sum of money following the divorce (eg through an inheritance or lottery win) their ex-spouse may potentially be able to claim a portion, even many years after the divorce.
As we mentioned previously, one way to help prevent these types of claims is by obtaining a financial order from the court.
What happens if excluding inherited assets puts one party in a much stronger financial position?
As mentioned above, the key decision for the courts will be to ensure that there is sufficient distribution of assets in any financial settlement to meet the needs of both parties.
If excluding the inherited assets of one spouse means that the other spouse is left out of pocket, then it may be necessary to add the inherited property (or a portion) to the matrimonial pot.
The ring-fencing of inherited assets away from the matrimonial pot is more likely to take place if the inherited assets have been stored separately and are not needed to meet the parties’ needs in divorce.
The level of financial settlement considered to meet the needs of both parties will differ widely on a case-by-case basis. If the married couple became accustomed to a certain level of affluence in terms of their lifestyle this will generally be taken into account.
However, this does not necessarily mean that it will be considered unfair if one party is left in a much stronger financial position due to their own personal inheritance; the courts will look at ‘needs’ rather than equality of division when it comes to non-matrimonial property.
Inheritance during marriage
Although there are many legalities regarding inheritance and divorce, many individuals will have their own opinions in regard to inheritance during marriage and whether they should share it with their spouse when divorcing.
Many believe that it’s solely theirs to keep if it’s been passed on from their individual family member while others may feel that although they’re divorcing, their spouse should receive an adequate share of their inheritance.
Many couples are able to make their own decision in regards to what they want to do with their assets in a divorce.
Furthermore, if this is the case it’s vital that you obtain a financial consent order to ensure no further or future claims can be made against either party.
This details what you both have chosen to do with your assets in a legally binding agreement and will also prevent any future claims from being made against one another in the future.