Inherited Assets In Divorce
As a general rule, most assets which are acquired during the course of marriage are added to the ‘matrimonial pot’ and divided equally upon divorce.
In practice, the court may decide that one party is entitled to a larger share, but a 50:50 split is the starting point. The factors considered by the court are set out in section 25 of the Matrimonial Causes Act 1973.
But any assets which have been inherited by either husband or wife are often treated differently in the context of divorce.
The rationale behind this was set out in the case of White v. White, in which the court acknowledged “the view, widely but not universally held, 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.”
In other words, when considering 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’).
Are inherited assets split upon divorce?
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 (eg money from inheritance) into the marriage, the source of these assets will become less important as time goes on and may gradually come to be seen as matrimonial property (Miller v. Miller).
- Mingling of property – where 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 (K v L). An example of this could be where a portion of the inheritance is used to purchase shares as joint shareholders, which significantly increase 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 (K v L).
But the factors mentioned above will generally only come into play if the matrimonial assets are adequate to meet the needs of both parties (eg in terms of a financial settlement). If the matrimonial property is insufficient, then non-matrimonial property will need 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 hard and fast rules when it comes to dividing inherited assets; the outcome will always be decided on the facts of the individual circumstances.
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 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.
Are future inheritances considered in divorce settlement?
In general, potential future inheritances are not taken into account when it comes to deciding a financial 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. One way to help prevent these types of claims is by obtaining a clean break order from the court.
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